Before we get our hands dirty, here’s a quick quiz on emergency funds:
- Do you have an emergency fund?
- How much should you have in your emergency fund?
- Enough for 1-3 months
- Enough for 3-6 months
- Enough for a year
- Which of the following should your emergency fund be used for?
- Unexpected medical expenses
- Your child’s education
- Your retirement
What is an emergency fund?
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What did you answer? Let’s see if you’ve got the right idea.
- If you don’t already have an emergency fund, it’s time to put one together! As its name suggests, an emergency fund holds savings intended to tide you through emergencies. That means maintaining a degree of liquidity, such that your cash is available when you need it. Setting aside an emergency fund is a process, so you should start saving even if you don’t have the full amount on hand. No matter your stage in adulthood, an emergency fund is a must!
- Emergency funds should hold enough to support you completely for 3 to 6 months. This includes necessities like food, transport and utilities, but also all other regular expenses such as loan payments.
- Of the options provided, the only two emergencies worth breaking into your emergency funds for are unexpected medical expenses and the possibility of retrenchment. Your child’s education and your retirement are long-term goals that you should save for separately, since these are milestones you expect to encounter.
While saving for eventualities like health problems and losing your job may seem pessimistic, preparing for the worst (financially speaking) ensures that you and your loved ones can withstand any situation life throws your way. With the world economy billowing in fickle winds, an emergency fund is your lifeboat.
Where should you keep your emergency fund?
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Now that you’re looking to grow your emergency fund, the next challenge is to find somewhere to put it. You may like to ensure that you have full access to your emergency funds when needed. Regular bank savings accounts can do the job, but it’s best to situate your fund more securely to keep from spending it on non-emergencies, such as during festive seasons.
On the other extreme, traditional securities and insurance savings plans tend to feature longer lock-up periods ranging from a few years to decades, making them less viable options for your emergency fund.
Between the two sits ELASTIQ, a flexible insurance savings plan that affords you immediate top-ups, and penalty-free withdrawals after just 90 days, no interest claw back. The short lock-up period corresponds to your requirement for liquidity, while fostering the financial discipline that comes with separating your fund from the rest of your savings. And the obvious perk: your fund grows at a guaranteed crediting rate of 1.80% p.a. for first 3 years, hands free. Where emergency savings go, ELASTIQ can help ensure that you are prepared to face any unexpected situation.
How else can help you achieve financial stability?
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Emergency funds constitute just one component of healthy personal finances. Long-term financial goals, such as your children’s education and your retirement, warrant a different savings approach. As we alluded to earlier, this can come in the form of investments, which should be made on well-researched grounds and well diversified. Insurance savings plans with longer policy terms, including our EASY save series, can also prove a valuable tool for growing your savings in anticipation for life’s events.
Stay cool always
There is peace in the assurance that you’ve got all of life’s bases covered, even in the face of an ever uncertain future. If emergency funds are good for one thing, you’ll already have a lemonade in hand the next time life serves you lemons. Politely refuse.
Learn more about ELASTIQ.
Information is accurate as at 7 November 2019. This policy is underwritten by Etiqa Insurance Pte. Ltd. (Company Reg. No. 201331905K). Protected up to specified limits by SDIC. This advertisement has not been reviewed by the Monetary Authority of Singapore.
As buying a life insurance policy is a long-term commitment, an early termination of the policy usually involves high costs and the surrender value, if any, that is payable to you may be zero or less than the total premiums paid.
Tiq by Etiqa Insurance Pte. Ltd.
A digital insurance channel that embraces changes to provide simple and convenient protection, Tiq’s mission is to make insurance transparent and accessible, inspiring you today to be prepared for life’s surprises and inevitabilities, while empowering you to “Live Unlimited” and take control of your tomorrow.
With a shared vision to change the paradigm of insurance and reshape customer experience, Etiqa created the strong foundation for Tiq. Because life never stops changing, Etiqa never stops progressing. A licensed life and general insurance company registered in the Republic of Singapore and regulated by the Monetary Authority of Singapore, Etiqa is governed by the Insurance Act and has been providing insurance solutions since 1961. It is 69% owned by Maybank, Southeast Asia’s fourth largest banking group, with more than 22 million customers in 20 countries; and 31% owned by Ageas, an international insurance group with 33 million customers across 16 countries.
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