Where You Should Stash Your Cash In Case Of A Financial Emergency

Almost half of Singaporeans do not have enough emergency funds to cover them for six months in a crisis, and 45% do not have enough funds for their family needs for the next year.

An emergency fund is crucial as it provides a financial safety net for unexpected expenses such as medical emergencies or job loss. The first step is to consider how much you need, which varies with individual circumstances such as job stability or consumption patterns.

A general rule of thumb is three to six months of monthly living expenses plus loan commitments. Self-employed individuals with an inconsistent income flow should have six to 12 months of emergency funds. The next step is to decide where to stash the emergency fund.

It should not be invested with regular savings for home purchase or retirement planning, as it should provide liquidity and safety. High-yielding accounts, investment platforms with money market solutions, and Singapore government saving bonds are suitable options.

People in different stages of life have different requirements for an emergency fund. For instance, families with children and dual incomes need to plan for various scenarios, including the possibility of both losing their income.

Self-employed individuals should build their emergency fund early and cater to their critical consumption needs before buying other expenses. Keeping the emergency fund up to date as life priorities evolve is also essential.

Source:
CNA Insider