How To Start An Emergency Savings Fund In Ghana
It’s a great feeling to get yourself an intervention in emergency situations, just imagine when you need money to cover your medical bills, emergency house repairs and unforseen contingencies and there’s no money to do that. You will have no option than either to go for loan or increase your credit card debt which is not the best option. Due to the situation you find yourself in, most people tend to accept high interest rates loan conditions. That’s why you need to “make Hay while the sun shines”, prepare for a needy day by starting emergency savings fund. It’s the best option to prepare yourself to catch emergency situations head-on to avoid severe borrowing.
An emergency savings fund refers to funds set aside as a secured financial net for future misfortunes and unexpected expenses. Emergency savings fund separates savings that’s reserved purposely to cover unexpected expenses and unforeseen contingencies. An emergency savings fund is not a long term savings due to it’s purpose and should be kept where it can be accessed as soon as possible in emergency situations. It can best be described as personal life insurance!
How Emergency Fund Works
As said already, to put some money in a separate savings account purposely to fund your emergency situations and unplanned expenses to avoid falling victim of living from paycheck to paycheck while striving to get your situations under control. It should be easily accessible in times of emergency and should have the tendency of giving you interest in the shortest possible time. An emergency fund should take between three months to six months of continuous savings and sometimes can even be extended to one year, from weekly or monthly income schedule. An emergency savings fund should not be spent unnecessarily unless you encounter emergency situations.
Factors To Consider Be Starting An Emergency Fund In Ghana
There are various factors to consider when starting an emergency savings fund in order to ensure that it works perfectly.
✔ Consider your Emergency Savings Fund in your budget planning.
✔ Determine where to save your Emergency Fund.
✔ Determine how much money to save in an emergency fund.
✔ set an emergency fund goals.
✔ Make list of emergency situations to consider in times of contingencies.
✔ Consider to cut off unnecessary spending.
✔ Emergency Fund should be easily accessible.
✔ Don’t spend an emergency fund unless it’s an emergency listed situation.
Why You Should Start An Emergency Account
Starting an emergency savings fund is very essential to everyone as it provides a secure means of sorting out emergency events. Below are some important reasons you should start an emergency fund.
1. Starting an emergency fund allows you to cover your unexpected but important expenses such as hospital bills, medical expenses, death of family member and other emergency situations.
2. It helps to contain your expenses when you suddenly lose your job, you can depend on your Emergency Fund for three months to six months or even one year while you are temporarily unemployed.
3. It helps you to cover unplanned household expenses such as emergency House repairs.
4. It allows you to pay for unforseen contingencies without using high interest rate credit cards or loans.
5. It protects your credibility by preventing you from borrowing.
6. An emergency savings fund increases your credit score and secures your financial future.
Starting An Emergency Fund In Ghana
The following steps summarizes how to start an emergency fund to get it working.
✔ Create a budget to include an emergency fund.
✔ Set an emergency fund goals.
✔ Create an emergency list.
✔ Automate your emergency savings account.
✔ Increase savings month by month.
Now let’s get into details on the steps involved in how to start an emergency savings fund.
1. Create a budget to include an emergency fund: The first step to start an emergency fund is to restructure your budget to include a savings fund. Budgeting allows you to know the exact amount to allocate in your Emergency Fund. Budget to trim your expenses to enable more opportunities of saving more money in your Emergency account.
2. Set an emergency fund goals: The next step is to set set goals for your emergency Savings Fund. Setting goals means determining how much to save in your emergency Fund, duration of an emergency fund and how much money you wish to have in your emergency account in a particular period of time. Research proves that continuous and regular savings of three to six months of your income is best enough for emergency fund. The purpose is that whether you are unemployed or meeting an emergency situation, the three to six months emergency savings fund can cover your expenses for that period. Most people extend their emergency savings to one year of continuous savings which is a good way to fund an emergency account.
3. Create an emergency situation list: This step allows you to make your own list of emergency situations that will lead you to withdraw your emergency funds. Clearly define the types of emergency situations that will compel you to go for an emergency fund. Unplanned expenses such as medical expenses, hospital bills, unexpected dismissal from work(unemployment), demise of a family donut don’t have to spend member, emergency house repair are few examples of emergency situations that can compel you to run to your emergency Savings account to cover them. It must be noted that you don’t have to spend your emergency funds unless it’s under your emergency situation list.
4. Open and automate your Emergency Savings account: Look for an account with good interest return to house your emergency fund, you can consider high-yield savings account. A high-yield savings account is known to be a good place to keep your emergency fund. With a high-yield savings account, your emergency funds are easy accessible with good interest rate to grow your account. Another way to put your emergency fund is money market. Money market is an investment account that gives high interest rate. It’s no different from a savings account but it yields short term interest than a savings account. You can also get a certificate of deposit account to house your emergency fund. This type of account offers a determined and fixed interest for a stipulated period of time and your interest on your emergency funds is highly guaranteed.
When you open your emergency Savings account, it’s best to automate your account for direct deposits. With this, your savings fund are deducted directly from your main account according to the time frame given. Whether weekly or monthly to ensure a continuous savings. It’s good to opt for online banking for your emergency savings account. This will make it easy to have access to your funds in times of emergency.
5. Increase savings month by month and keep saving: Gradually find opportunity to increase your emergency savings each month. This allows your account to grow well within your set goals. Keep saving as usual even if you reach your emergency fund goals, it will help increase your financial security in future.