What is an emergency fund?
According to wikipedia: An emergency fund, also known as contingency fund, is a personal budget set aside as a financial safety net for future mishaps or unexpected expenses. Source
An emergency fund is a hidden resource that should be able to last you in the space of 2 to 3 month. It is quite different from savings. For emergency funds, you have no particular reason for keeping the money in that bank account but for saving you have a reason.
What is saving
According to wikipedia
Saving is income not spent, or deferred consumption. Methods of saving include putting money aside in, for example, a deposit account, a pension account, an investment fund, or as cash. Saving also involves reducing expenditures, such as recurring costs. Source.
Prior to the definition given, savings is income not spent. That is, you have to earn before you can have a savings. Most people have mistaken this two to be the same but they are not. A savings have an end goal, there are reasons why a person would want to save some amount of money. Either to buy a house, a car or travel out of the country
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On the other hand, an Emergency fund is a fund set aside for an unexpected event. For example, the covid-19 virus that affected the whole world wasn't planned for and it affected a lot of people because many people had to use their savings to battle hunger. During that time, it was the money at hand people could use and many people went into hunger Which is why it is very important to have an emergency fund.
Tips to having an emergency funds
Set a different amount you will put in the emergency fund that's different from your savings. it doesn't have to be that much. If you have a plan of purchasing a thing or a goal to attend with your savings. The amount you put in the saving can be more than that of the emergency fund. If you are serious about it, then you can make it work.
Reduce the way you spend your money. To be rich isn't a day job. You have to be prudent enough to make this plan work. You don't have to impress anyone with your spending. A lot of people have gone broke and are into debt because they want to impress people that wont add value to them.
Do not take from your emergency fund unless the state you are in is an emergency state. This way your emergency fund will continue to grow and it will come in handy when the need comes.
In conclusion.
It is not an easy task to start up your emergency fund because it takes a lot of courage especially in times when there is inflation and hyperinflation in most countries. Be of good faith and take a step towards it, if you cant then make you save a lot of funds. Image source
