Step 3 of 4
Juan's safety net
With ₱4,000 going to savings every payday, Juan's next question is how much he actually needs.
Step 3: Juan's emergency fund targets
- Monthly costs if he lost his job (essentials ₱13,500 + loan ₱2,000)
- ₱15,500
- Starter goal, about 2½ months away
- ₱10,000
- 3 months of expenses, about a year away
- ₱46,500
- 6 months of expenses, his longer-term goal
- ₱93,000
Because his parents rely on part of his income, he won't stop at the starter goal. He aims for 3 months first, then 6. He keeps the fund in a separate digital savings account he can withdraw from anytime, and doesn't link it to a debit card he carries.
Reading your results
- What does my result tell me? Divide your current savings by your essential monthly expenses. That's how many months you could cover if your income stopped.
- What needs my attention? Under 1 month: one surprise could push you into debt. 1 to 3 months: you're building. 3 to 6 months or more: you've reached the usual target.
- What should I do next? If you're below your target, raise your automatic transfer, even by ₱500. If you've reached it, leave the fund where it is and send new savings to the next level of your pyramid.
When an emergency affects the whole family
Not every urgent expense is an emergency. A real emergency is unexpected, necessary and urgent, like a hospital stay, a job loss or typhoon repairs. School enrollment, vehicle registration, insurance premiums and Christmas come every year, so plan for them instead.
- List your yearly costs, divide each by 12, and save that amount every month in a separate "sinking fund."
- Decide ahead of time how much of your emergency fund can go to a relative's emergency, so you can help without emptying it.