Creating an emergency fund for life's curveballs

The COVID-19 crisis has been a wake-up call for individuals across the world to get their finances in order. And, with the start of the new financial year upon us, there's never been a better time to plan ahead and take the steps towards building an emergency fund.


With 1.34 million Aussies applying for the COVID-19 superannuation early release scheme1, it highlights the fact that when events you have no control over arise, having funds set aside can be a vital resource to manage unplanned costs.

By building an emergency fund and  preparing yourself for a financial setback, it can set you up to handle it with less stress, and bounce back more quickly when you need to recover.

It’s especially helpful to think about these plans at a time when things feel “normal,” even if it is a “new normal”.

Tips to jump-start your savings

If you don’t have an emergency savings account in place yet these 3 easy to implement tips can help you get started.

Assess Your Budget

If you have never created a budget, it’s well worth doing. It will give you an overall view of your finances and help give you control. Your budget should include how much you have coming in and how much is going out over a period of time. Drawing up a budget helps you work out where you can reduce your spending and plan for other expenses.

Pick one thing and cut it!

It sounds cliche, but everyday savings do add up! Understanding how to save more money is easy when you know where your money goes - it makes it easier to find ways to save with cheaper alternatives. For instance, could you cycle to work to save on petrol, make your lunch instead of buying it or cancel that sports channel you don’t watch anymore? 

Due to recent social distancing and self isolation measures, you may have already reduced your discretionary spending, making now a good time to step back and reevaluate what you could do without.  Calculate how much you are saving each month from your daily change, and capture that amount by putting it in your emergency fund.

Prioritize saving habits

Don’t stop once just because you’ve hit your initial savings target! Steadily increase your savings goals until you have put aside enough to create a significant buffer against unexpected emergencies. Could you apply your new savings habits for the next goal?

How much exactly do you need to set aside?

It really depends on your personal situation. As a rule of thumb an emergency fund should ideally have enough to cover a few months of expenses including rent or mortgage repayments, groceries, transport and utilities bills. Cash savings are a lifeline when it comes to unpredicted expenses, or other financial setbacks. 

Expert advice adds up

Even with the best intentions, staying on track with savings goals can sometimes be tricky - we get it. Which is why at FinChoice, we can help guide you on your financial journey. 

Our expert advisers can work with you to set your savings goals, review how you've structured your bank accounts and come up with a tailor-made plan to kick some savings goals.

1 https://www.apra.gov.au/covid-19-early-release-scheme-issue-3


To find out more, give your local FinChoice adviser a call today.