Emergency fund: What every OFW needs to know
I mean you had an extreme situation that demanded extra money for emergency cases. Unfortunately, you might have failed to prepare for these worst-case scenarios.
- Your 65-year-old father was diagnosed with liver cancer and needed an immediate medical attention.
- Because of typhoon Yolanda, you were obliged to send 50,000 pesos for house repair.
- Your husband, who is a seaman, has to go back home temporarily due to a serious accident.
- The employer informed you that you have to extend your visa this time at your own expense.
- You were one of hundreds of Filipinos to be repatriated from the Middle East due to political unrest or civil war in the region.
- You’ve got a call from your loved ones in the Philippines. They’re practically asking you to send 60,000 pesos immediately because your eight year-old-son is in the hospital.
How did you picture yourself? Worried? Depressed? Nowhere to go? You don’t know where to borrow money? So sad, right?
This doesn’t’ have to be your story. If you have ever experienced any of these cases as an OFW, then you would know how important it is to have an emergency fund. The good news is we can learn financial lessons from the mistakes of other OFWs.
But what is the purpose of emergency fund? As the word suggests, the ultimate purpose is to prepare you for unforeseen emergencies. These are 6 points what every OFW needs to know about emergency fund:
1. Emergency fund reduces your stress
Imagine how stressful it is to be repatriated from Syria due to political unrest? But it would be even more stressful if you don’t have enough fund to sustain your personal financial obligation back in the Philippines. By having an emergency fund, you reduce anxiety and stress. Having an emergency fund also means that you do have room to breathe and stay calm despite the situation.
2. It encourages you to practice good budgeting
Setting aside even a small amount of money regularly for emergency fund develops your skill in budgeting. It can make you more financially-responsible. As a result, you will have opportunity to curb your spending habits, especially on buying luxury items that are not important. It makes you practice living within your means, which is very important to become financially-independent. If you want to make your fund readily accessible during emergencies, start building your emergency fund today
3. You avoid going into debt
It is logical that when unforeseen event strikes, like accident or job loss, and you are not financially ready, chances are you are going to borrow money, right? But what if nobody is willing to lend you money without an interest? That means taking a risk on paying interest on top of the principal that you are borrowing? And this is where debt can start to haunt you.
So to avoid huge amount of debt in the future, it is necessary that you develop a habit of saving for emergency fund.
4. Keep your fund as liquid as possible
Many financial gurus suggest to make your emergency fund readily available when you need them. You can keep them in the bank so you can withdraw the money anytime with no minimum holding period unlike mutual funds or other investment vehicles.
5. Set aside reasonable amount
How much money should you set aside for emergency fund? In a nutshell, emergency fund must be about three to six months of your monthly expenses. For instance, if your monthly expense is 30,000 pesos you should have at least 90,000-180,000 pesos. Having an emergency fund will allow you to continue your current lifestyle without going into debt.
6. The future is uncertain
God wants to bless his children spiritually and financially. However, even the children of God are not free from unforeseen event such as illness, accidents, disaster, and natural calamity. They definitely affect our lifestyle. As stewards of material blessings, God is not happy to see His children suffer due to negligence or poor handling of finances. Therefore, you have to be ready financially in case emergency occurs.
“A prudent person foresees danger and takes precautions. The simpleton goes blindly on and suffers the consequences.” Proverbs 27:12, NLT
Lastly, never forget to seek God and pray because He cares for you.