Growing Online Income

You Need an Emergency Fund

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Life is, for the most part, wildly unpredictable. While that can be a lot of fun – who imagined at 26 I’d be living my own personal dream, traveling the world, staying in nice hotels and resorts for FREE (more on that later) and earning a really decent income online?

Not me. Of course I wanted it to happen, I just didn’t really think it would.

Life is unpredictable like that and litttle bumps in life’s journey can be really stressful, even more so if you are not prepared financially. It’s so important that you set up an emergency savings fund and get saving, if you don’t have one already. You’ll want to find a savings account that is easy to access and does pay a decent rate of interest and perhaps one that is separate to your normal spending accounts so you don’t “accidentally” dip into it. Saffron Building Society has a wide rage of accounts that might suit your needs.

I come from a relatively “poor” family, with both parents relying on welfare my entire life. I grew up poor which taught me a lot about money. From an early age I could see the consequences of having no spare money for when things go wrong.

As I am now earning a really decent income, I want to be sensible. I really want to make the next few years count so I can set myself up for life. My first goal, since blowing a lot of my previous years’ income, was to create an emergency fund.

How Much to Save?

My goal for my first tier of my emergency fund is $12,000. As of tonight (a payment is going through overnight into my emergency fund account) I have reached this goal. Hooray!

You might be wondering why I chose $12,000 – a relatively random number? Well, it works out to be around $1,000 a month which is about what I need to live fairly comfortably in Asia. Conversely, it would be enough for about 6-8 months worth of personal expenses for me in New Zealand. This means if anything goes wrong and I can’t work, or the Internet just falls off the side of the planet, then I have a lot of breathing room to getting back on my feet.

Ideally I would like to save another $3,000 and then ultimately have a $30,000 emergency fund, but this is something I will revisit after I pay back my student loan. I like the idea of having $30,000 set aside because that would be a comfortable emergency fund for my partner and I back in New Zealand for 8-12 months and in Asia for double that length of time.

Why Do You Need an Emergency Fund?

Life. Life happens, and you need to have a bit of room to breathe. Because my parents are not financially wealthy, I am their backup. I am my backup too. That is a big mental burden and having this spare money set aside ensures that I know I am able to get myself out of a tricky situation.

My emergency fund will be a lump of money I will not touch unless there is an emergency. Say something happens at home and I need to urgently fly home, then I have the money sitting there, but if I don’t need to spend it I want to keep it sitting there, somewhere easily accessible, so I always have that safety net.

I am very happy to reach my first goal with my emergency fund and now that means I will pointing my attention to my student loan, and paying that off as aggressively as possible. At present my loan is in the range of $32,000 so I am setting a challenge to myself to see how quickly I pay it off.

Thankfully I am not spending very much money in Asia at the moment, so I will be able to pay my loan off faster here than if I was back in New Zealand due to the lower living costs here.

Do you have an emergency fund? How much is in there?

If you don’t want to answer with the actual number, feel free to convert it into months of living expenses. I would love to know

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4 Comments

  • Emergency funds are extremely important if you don’t want to acquire more debt in case some financial emergency happens. My emergency fund is small now (only about two months worth of expenses), but I add to it every month and my goal is to have 6-months worth of expenses.

    • Christine says:

      I think six months worth of emergency fund is an excellent goal. I agree, if you don’t have an emergency fund you’re going to get stuck at some point – life’s just like that.

  • Jason Butler says:

    I had an emergency fund but had to use it. Once I start working full time again I plan on growing it asap.

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