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Who knew, right? Who could have predicted (aside from Bill Gates) that such a wide-scale pandemic would paralyze entire countries, leave thousands of businesses bankrupt and millions without a job or income.
While the Philippine government have tried to support people who have not had any income during the quarantine with some social amelioration programs (SAP, locally called “ayuda”), unfortunately, it was not really enough.
While some businesses restarted during the general community quarantine (GCQ) in June, the curve does not seem to have flattened at all and there are still a lot of people unable to return to work, such as Jeepney and bus drivers, etc. There’s also not a lot of people around and most small businesses I see seem to be struggling. Many have also closed permanently.
It’s a sad reality.
Who knew something like this would happen, right? I certainly didn’t.
There’s a reason why a lot of personal finance instructors tell people to save up an “emergency fund”, and this pandemic showed us exactly why.
Why We All Need to Build an Emergency Fund Account
What is an Emergency Fund?
An emergency fund is is simply having a savings account with enough money to last you three to six months of living expenses. This fund, by the way, is different from your savings and investments that are meant for wealth building and retirement.
What do we mean by having three to six months of living expenses saved up? Let’s say you calculated that you spend around P5,000 on food and another P5,000 on electricity, water, internet and other expenses per month (P10,000 total). You should try saving until you have around P60,000 in a separate bank account that you will not touch unless extreme emergencies happen, such as a job loss, a death in the family, or a pandemic like this.
While saving up such a large amount seems difficult, you’ll eventually have that much if you start saving now. It may be inconvenient at first when you haven’t formed the habit, but the payoff is that you’ll be prepared in case a disaster like this happens again. Knowing how life works, problems and disasters DO happen every once in a while. The only questions are “when?”, and “are you ready?”.
How to start saving
Like saving for retirement, the number one tip when making an emergency fund is take a part of your income (around 10%) as soon as you receive it, stash it away in your emergency fund, and then “forget” about it.
If you keep remembering that you have some “extra money” somewhere, you may get tempted to spend it. Treat that money as if it’s already “spent” or gone forever, like a downpayment for your 100th birthday party or something.
Start it this month or on your next paycheck, and keep doing it. You will eventually build up a good amount of money to keep you financially safe during emergencies.
Other tips to consider:
1. Keep some emergency cash at home.
I thought this tip was mostly because sometimes your bank’s system and ATMs might be offline and withdrawing money might be inconvenient. Never have I thought that we’d be completely unable to go out to withdraw money because of a pandemic. Still, there are worse disasters that could happen such as earthquakes and typhoons that can destroy the city’s power grid. Cash is king, so be prepared.
2. Save your emergency money in a bank account with a credit or debit card, and keep it locked up.
Again, keep your emergency funds’ card locked up for emergencies so you aren’t tempted to spend it. The reason why you should have a credit or debit card (hopefully one with no annual fees) is for cashless purchases online. For this pandemic specifically, it will be extremely valuable for buying food and other supplies online to have them delivered to your house.
3. Learn about online and mobile banking, as well as basic cybersecurity.
If you want to pay your bills here in the Philippines, you no longer need to go out and line up at the nearest BayadCenter branch. You can actually do it all online if you know how. Thankfully a lot of banks have already partnered with BayadCenter so you should be able to pay your bills on their websites or apps. Try exploring them to learn how (or call your bank to ask how) to pay your bills online!
A small warning: Since online banking is becoming more popular, there WILL be more scams (“modus” in Tagalog) targeting older people and those who are not internet-savvy. When your bank sends you cybersecurity tips, READ THEM. It’s much better than losing hundreds of thousands of pesos because you didn’t know you were talking to a scammer and not a “customer service representative”.
A few basic online security tips:
- Never tell anyone the One-Time PINs (OTP) you receive. The person who asks is most likely a scammer.
- Never tell anyone your credit card number and the CVV at the back of your credit/debit card. That’s probably the last info most scammers need to use your card and spend your money online.
- If you receive a call from a “customer service representative” on an unknown number, be wary if they ask for your mother’s maiden name, your full address, telephone number, and other details for any reason, including “updating your records”. Real customer service representatives need that kind of info to confirm your identity for phone and online transactions. If you tell it to a scammer, they might try to use your info to call your bank, pretend to be you, and attempt to access your account to steal your money.
- If an alleged representative calls, end the call and ask your bank (through the phone number on their main website) if it was actually their representative, then have them call you back if it was legit.
I hope you found the tips here helpful. Serious problems like this pandemic, typhoons, earthquakes, job losses, deaths in the family, etc. happen every so often and having some emergency money saved up can really protect our lives from financial ruin.
I hope you stay safe for now, and I hope that if you follow this advice you’ll have more than enough money for the next challenge that life gives you.
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