When society is all about spending or investing, it can be easy to forget the power of just having your savings in cash.
An emergency fund is basically a savings account which has an 'appropriate' amount of money. The idea is that if something unexpected happens in your life, you won't need to take a loan or cash out your longer-term investments to handle it.
How much should I have in my emergency fund?
At the very least, you should aim to have 3 months of expenses in your emergency fund. So if you spend HKD 8,000 each month on average, you would want to have about HKD 24,000 in savings to cover your rent, food, transport and other basic expenses.
We recommend, you aim to have 6 months of expenses. This ensures in an economy down-turn if you lose your job, or if you have to face any medical emergency, you have a reserve to fall back upon.
Where should I put my emergency fund?
Generally speaking, any savings account is fine – what's important is that the savings should be easily accessible so you can withdraw whenever you need it. So long time deposits or stocks would not be a great idea since with time deposits, you're locked in, and with stocks, you may be forced to sell during a bad time in the market. If you really wanted to make your money work harder, you could consider some low risk investments.
In Summary
Emergency funds are an essential part of your financial health – if you're low on savings, you can aim for 3 months, but ideally work your way up to 6 months of savings. Make use of Planto's goals & budgeting features if you need help getting there!
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