CHINKEE, what is one of the most common mistakes that most Pinoys make?
Not setting up an EMERGENCY FUND.
Every vehicle is required to have a spare tire. Why? So that when you experience a flat tire on the road, your reserve tire can allow you to change your flat tire and keep going, allowing you to get where you need to go.
If every car has a spare tire, how come most people do not have a reserve fund, or otherwise called as an EMERGENCY FUND? Just as a spare tire can come in handy during an emergency, we also need a reserve fund for unexpected emergencies in life.
What is an emergency fund?
An emergency fund is money set aside to be used in an emergency, such as the loss of a job, an illness, or a major unforeseen expense.
“Chinkee, are you saying that we should be pessimistic?”
Not at all!
As breadwinners, we must be practical at the same time responsible. However, life does happen and we do not control it. Even if we always want to hope for the best, we still need to prepare for the worst. It is unwise for anyone to not prepare for the unexpected.
There is a common saying that goes: “If you fail to plan, you plan to fail.”
You see, being able to foresee and prepare for the unexpected can help your children AVOID GETTING INTO FINANCIAL STRESS.
In the absence of an emergency fund, people usually resort to borrowing money when an emergency comes up. This is one of those things that we never want our kids to experience or to get used to. Remember, borrowing money can easily lead to debt.
Whether we like it or not, there will be unforeseen things that will happen in our lives. Whether it’s an unexpected medical expense or a house repair, there will always be “something” that we never would have seen coming.
Allow me to share with you some of them:
Medical expenses – An injury from playing sports or a sudden emergency procedure that needs to be performed on a family member.
Car breakdown – A broken headlight, a cracked windshield, or a flat tire after a long drive.
House repairs – A faucet leak, a broken door knob, plumbing problems, or a roof that needs fixing.
Special events – Birthdays, weddings, anniversaries, christenings, etc. that you were invited to attend.
New clothes – Formal clothes for a gala that you need to attend for work.
Sick pet – Tick bites on your pet dog, or a virus in your pet cat.
People requesting for help – Friends borrowing money for a business endeavor, a church missionary asking for support, or a neighbor asking help with his daughter’s tuition.
Family emergencies – Death of a loved one, or job loss.
So do you see? Building an emergency fund is one of the most important things that you can do to help them be financially prepared even in times of unforeseen circumstances.
THINK. REFLECT. APPLY.
Do you have an emergency fund? If not, why?
