Building an emergency fund is crucial for financial stability, especially during challenging times like the current global economic crisis and political uncertainty. An emergency fund acts as a financial cushion that allows individuals and families to handle unforeseen situations without panic.
According to economist Omar Azañedo Sayán, creating such a fund requires discipline and organization. The economic outlook nowadays is troubling, with slow growth expectations not only in countries like China and the United States but also across Europe and Latin America.
The pandemic highlighted this need when many people found themselves without savings, struggling after job losses or pivoting to digital work. This underscores the importance of having an emergency fund.
An emergency fund can cover a range of unexpected situations, from household accidents and theft to health emergencies, job loss, or natural disasters affecting your home. Azañedo Sayán recommends saving at least 10% of your monthly income. This might seem like a small amount, but for many, it presents a significant challenge. However, with careful spending and a focus on priorities, achieving this goal is possible.
To build your fund, identify areas where you can cut expenses, giving priority to essentials like food and healthcare. Organizing your finances can help immensely—using a spreadsheet or a budgeting app can clarify where your money is going and help you prioritize your spending.
In countries like Peru, where informal employment is prevalent, many people may not receive benefits like bonuses or may not have stable, predictable income. Nevertheless, gradually saving money for emergencies is achievable.
It’s also wise to consider how to invest any surplus funds. Having an emergency fund in a bank account that doesn’t charge maintenance fees and allows for easy withdrawals is ideal. For more substantial savings, fixed-term deposits could be an option.
Azañedo Sayán encourages Peruvians who have accessed certain funds, such as severance pay or bonuses, to consider investing in a small business. By doing so, individuals create an opportunity for fast returns, helping to generate additional income streams. Diversifying sources of income is essential for saving and managing monthly expenses effectively.
Starting a small business, particularly in commerce, can yield regular, swift returns and foster financial resilience. In a challenging economic climate, having multiple income sources can be vital for meeting daily needs and emergency expenses.
Image and News Source: https://www.infobae.com/peru/2024/07/26/que-tan-importante-es-contar-con-un-fondo-de-emergencia/
