Why You Need an Emergency Fund and How to Build One Quickly

Emergencies always seem to happen when you're already in a bind. Imagine suddenly losing your job, and on the same day, your car springs a mysterious leak. Life just has a habit of throwing these curveballs. That's why having an emergency fund is so important. It's your financial cushion for those moments when things don't go according to plan.

Without an emergency fund, many people end up borrowing money or maxing out their credit cards, adding even more stress to the situation. The good news is you can have an emergency fund without too much hardship. With a little planning, you can create that oh-so-timely safety net. Knowing money is available when it's most needed gives you peace of mind. With the right strategies and financial tools, you can grow your savings faster than you think.

Why an Emergency Fund Is a Must-Have

Think of the emergency fund as your financial life preserver. It keeps you afloat when life overwhelms you. Without one, it's easy to fall into debt by relying on borrowed money. An emergency fund helps prevent that.

So, how much is enough for an emergency fund? More is definitely better, but experts recommend a minimum of three months' worth of living expenses. That might seem like a lot, but it really isn't. 

The amount you need in an emergency fund depends on a few things, like how much you spend each month and your personal situation. If a large chunk of your income goes to regular expenses, then having six months' worth would be a good idea. If you have a secure job or few responsibilities, you may not need as much. The important thing is to set a reasonable target and start saving.

For example, if monthly expenses add up to around PHP 30,000, aiming for PHP 90,000 to PHP 180,000 is a good target to cover three to six months of costs. Of course, you probably won't be able to get that much overnight, but taking small steps will eventually get you there. 

How to Build Your Emergency Fund Quickly

While saving up for an emergency fund might seem like a slow process, there are ways to speed things up. With a little creativity and consistency, reaching that goal becomes much easier.

1. Set Small Goals

Don't try to get to three or six months' worth of savings in one go because you won't get it unless you win the Lotto. Set smaller, achievable goals based on your income that you can stick with. For example, target a balance of PHP 5,000 or PHP 10,000 and build up from there. Check out any promos that might help you save a bit of gas or grocery money and set that aside in another account with a target. You might be amazed at how fast those small savings accumulate. 

Every time you hit a smaller target, it's a win that keeps you motivated to keep going. A good rule of thumb is to set aside 20% of your monthly salary, so start with 5%. Once you get into the habit, work your way up.

2. Prioritize Your Savings

One of the easiest ways to prioritize savings is to pay yourself before anything else. Set up schedules or automatic transfers from your payroll to a savings account each month. This way, you're saving before you even have a chance to spend the money. 

Automating your savings, in particular, gives you a kind of blinder. You won’t even notice the money leaving your account, so you won't be tempted to spend it as much. That makes it easier to build that emergency fund.

Many banks, including EastWest Bank, offer easy ways to set up automatic transfers. Money goes straight into savings without you having to think about it.

3. Sell Unused Stuff

Look around the house—there's probably a lot of stuff you don't use anymore. Selling old gadgets, clothes, or furniture can help raise cash for your emergency fund. 

Anything you don't want, can't fit into, and will never use is fair game. Put them on the selling block and turn trash into treasure. Online platforms like Facebook Marketplace or Carousell are great places to sell items quickly.

4. Use Extra Income

Any extra money that comes your way — bonuses, extra paychecks, or even gifts — should go straight into your emergency fund. The good thing about bonuses or extra pay is they’re gravy. They aren't part of your regular budget, so putting them in a savings account will not impact your lifestyle.

5. Pick Up a Side Hustle

A side hustle is an easy way to bring in extra cash that can go straight into your emergency fund. It doesn't have to be a full-time job — just a few extra hours a week can make a big difference. Freelancing, drop shipping, and other side gigs can help you build that fund faster. 

6. Cut Back on Non-Essentials

Consider cutting back on some of your non-essential spending to save more quickly. Maybe skip eating out for a month or downgrade your subscription services. These small adjustments can free up extra cash to put toward your savings goals. Just make sure that’s where it goes.

7. Use a Savings Challenge

Most people love challenges. One that motivates you to save steadily is the "52-Week Savings Challenge." The idea is to save a certain amount weekly and increase the amount in succeeding weeks. For example, you can do it in increments of PHP 50. In the first week, you save PHP50. In the second week, it's PHP100, then PHP150 in the third week, and so on. By week 52, you'll have saved PHP 68,900.

This challenge is perfect for gradually building your savings without feeling overwhelmed. You can change the amounts to fit your budget by starting with smaller increments or extending the time frame. If you want a different approach, try the "Reverse 52-Week Challenge," where you start with the largest amount and decrease it over time.

Set Up a Savings Account for Your Emergency Fund

When choosing where to store your emergency savings, a savings account is usually the best option. It keeps your money secure and accessible and earns a little interest along the way. A time deposit yields higher interest than a savings account. However, you lose that advantage if you withdraw the funds before the prescribed date, which is why time deposits are usually chosen for saving goals that are not less likely to require immediate access to the funds. Still, it’s worth considering. 

Opening a savings account at EastWest Bank can be a great choice. With competitive interest rates and no complicated fees, our bank provides a safe and easy way to grow your savings. EastWest Bank also offers several account types that can help you manage your finances effectively, depending on your needs. These include a regular account with easy access to your funds or a more specialized account that helps your money grow more.

If you want to expand your financial capabilities even further, consider a personal loan to help with larger expenses or important purchases. EastWest Bank has options to suit different needs.

Time to Take Control of Your Finances

Building an emergency fund is essential for peace of mind and one of the best financial decisions you can make. The issue for most people is it takes time and discipline to get it to where it should be. However, with the right approach and strategies, you will reach your emergency fund target faster than you think. 

If you're ready to start building your emergency fund today, check out the savings accounts available at EastWest Bank. Start saving now and take control of your financial future.