How Much Should You Have In Your Emergency Stash?

Is an emergency fund really necessary and if so, how much should you have in it?

FSM Mar 09, 2018 3561

"A penny saved is a penny earned", this highlights the importance of saving while also emphasizing the necessity of an emergency fund. According to Bank Negara Malaysia, more than 75% of Malaysians find it difficult to raise RM1,000 of immediate cash money for emergencies.1 This is an alarming sign because anything can happen and the worst part is you do not have a financial safety net to fall back on when you need money the most.

An emergency fund refers to a sum that is set aside and left untouched for unplanned expenses. This could include unforeseen medical expenses, the loss of a job or even used by your family to tide over difficult times. As such, it is essential that this fund is liquid and easily accessible to be withdrawn whenever necessary. In this article, we show you how you can build an emergency fund in just 3 simple steps.

Step 1: Your Expenses

As an emergency fund is intended to act as your financial safety net for unplanned expenses, knowing how much you spend allows you to better determine how much your emergency fund should have. Start by tracking your monthly expenditure and any other recurring payments. Additionally, do also take into account any big upcoming purchases or life stage changes that may affect your monthly expenditure. This would then ensure that your emergency fund would be sufficient should you need to use it in the future.


Step 2: Review Your Insurance Portfolio

Next, review the insurance policies that you have on hand to see if your current policies can provide sufficient coverage in the event of a mishap. If you are adequately insured, you should be able to receive a lump sum pay out in the event of a critical illness, total permanent disability (TPD) or death. It is important to note that an emergency fund is not only intended to help your family tide over difficult times but also to help you with financial emergencies. For example, in the event that you were to lose your job or become temporarily unable to work, an emergency fund could then come in handy to help you tide over financially.

Step 3: Establish Your Required Time Frame

While it is often advised to have 3 to 6 months' worth of your monthly expenses in your emergency fund, there is no hard and fast rule to this. This is because estimating the time required for you to recover from the financial situation may be more accurate in helping to determine how much your emergency fund should have. For example, if you expect yourself to take 3 months to look for a new job, then perhaps have at least 3 months' worth of expenses in your emergency fund. Alternatively, consider putting more into your emergency fund if you are the sole breadwinner of your family and have a house and car loan to finance.


How FSM INSURANCE can help you get on track

Here at FSM Insurance, we walk with our customers through their life’s journey. Our team of friendly advisers are able to help you review your financial objectives, long term commitments, and customize investment and insurance advice specific to your needs. Email us at for more information.


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Protect yourself and your loved ones now and enjoy savings at FSM INSURANCE!


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