Life can throw us curveballs unexpectedly. Some of the events can be devastating and when we get hit, it could make life hard for many. To some, it may not be a significant event but to others, it may be a huge blow.
Whether or not it is a huge blow, it boils down to whether or not we are in a good or healthy position to deal with the consequences and many a time, it involves spending or using money to solve or put off the fire.
When these surprises happen, we have to deal with it and make adjustments. Generally, we have these three choices:
- Extend our timeline;
- Forgo our goal;
- Live with regret.
Of Critical Importance
That is what makes having emergency funds or savings a critically important item.
I have seen many people in “thin” situations financially. In fact, not too long ago, it was reported in news that many young people (75% as a matter of fact) admitted that they would not be able to fork out RM1,000 to deal with unexpected emergencies. This shows how fragile we are.
If you think that this news is unfounded, please know that the source of the alarming data is the central bank of Malaysia, so, this is certainly no fake news. In another news, we were told that working Malaysians could not survive six months if they were to lose their income.
How to Put Money Away Easily
Is there a good way for people to save money and ensure the money gets saved? The easiest way − and I have seen it working countless times − is to save the money you bring home without you being aware of it, or having to remind yourself to do it.
Automatically Move It
The first way is pretty simple. You just have to login to your internet banking and look for the transfer of fund button, make it automatically repeat on a monthly basis on a date you are certain your salary will be credited to the account (don’t pick a date that is too far away from this date but try to be within a three-day range).
This mean you will have successfully “outsourced” this job to your online banking system in that it moves your money from your salary-receiving account to another account without you having to worry about forgetting to do it.
However, it is important to note that you nominate an account you will not have easy access to, like an account without an ATM card, or an account that has very few branches or that each MEPs withdrawal will cost more than RM1.06. The trick is to move the money where it will not be easy to make unplanned withdrawal or spending.
Park at Flexi Mortgage Account
If you have a flexi mortgage account, you can also “park” your money there. It will benefit you and help you to retain the money as a rainy day fund.
Alternatively, you may set up a standing instruction to move this saving into a money market fund or cash management fund. It is important for our rainy day fund to be liquid-like cash and money in a savings account, as these two options provide this feature.
If you are trying to force yourself to save money by signing up for an insurance endowment or savings plan, this may not be the best thing to do because when you signed on the dotted line, you are in fact agreeing or committing to pay the fixed amount of premium over a long term period which could be five to 20 years or even longer. This means you will not be able to withdraw the amount you may need in an emergency, unless you are in the late stages of the policy life or have past the guaranteed premium paying years.
It is important to note that the instrument or place we choose to park our emergency or rainy day fund has the right criteria and characteristic, and is safe, liquid, and cost-free.
About the author
Kevin Neoh is a NextGen Money Coach who works with people to help them transform their relationship with money to improve their lives with the money they have. Kevin can be contacted at firstname.lastname@example.org and www.kevinneoh.my.