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Emergency Fund Account A Must
Fraud is one of the reasons why we should have money hidden somewhere for emergencies. It is simply plan B for when calamity strikes.
Buildings have emergency exits. Busses and planes have them. Cars have spare tyres and, businesses that use generators have a back-up generator on stand-by. People who use glasses for reading and driving hopefully have an extra pair. Well! That’s another story.
Human beings must also have emergency funds, not under the mattress but in a bank, where they can be transferred electronically to deal with an emergency.
It can be withdrawn as cash, but I don’t like the idea of carrying large sums. I blame Yoruba movies with scenes of people being robbed after a bank withdrawal or attacked at home after a tip-off that there is one million naira (Nigerian currency).
An emergency fund is hard cash, not the five credit cards in your wallet. It's a garden you water every month, but don’t pull out the roses and put them in a vase because they will wilt after a few days.
I will never be a fraud victim. You wish. It happened to me recently and that is when I fell back on my emergency fund, which is peanuts compared to Bill Gates’.
My regular source of income was rudely cut off through no fault of my own. I thought of maxing my credit card but quickly deleted the idea because the interest was going to choke me.
We had to report the case to the police for obvious reasons. In the meantime, I had bills to pay and food to buy so I lived off the emergency fund for about two weeks until the problem was solved.
When I set up the little fund, it never occurred to me that there would be an emergency. Bad things only happen to other people, right?
Reasons For Not Saving
Unfortunately, we have one hundred and one reasons why we do not have money stashed away for a rainy day.
- · I don’t earn a lot of money.
- · I work part-time.
- · I have growing kids.
- · I have to pay my credit cards every month.
- · My wife or husband will help me out if I’m strapped for cash.
- · My kids have good jobs. They will pitch in.
Salary And Wages
It is difficult to quantify ‘a lot of money’ because, it's human nature never to be satisfied with what you have. That is why some millionaires and billionaires are found guilty of tax evasion or big time fraud.
Salaries and wages are the only source of an emergency fund for working people. They must put aside $30, $50 or $100 every month into a special account.
The most difficult part is the starting line. After that, you become used to it that your monthly take-home pay after taxes is $4,900 instead of $5,000. This is just an example. People who earn more, can put more than $100 into an emergency fund.
Admittedly, it will be difficult for part-time workers, but they can find a solution. What is also tricky is a joint account when husband and wife are working. How much should they throw in the emergency fund? Should it be a joint fund or separate?
The government deducts taxes from what we earn and what we buy. It’s a government thing. We cannot do anything about it.
You can get some of that back by filing a tax return if you qualify for a tax refund. Just close your eyes and drop that electronic cheque into the emergency fund.
Financial Help From Family
There is no guarantee that family members will help you if your source of income is interrupted or if you lose your job.
Family and friends tend to love us when we are buoyant and independent and not to take our calls or visit us when we are retrenched or the car is a write-off after an accident.
If family members don’t have an emergency fund, how do you expect them to help you when you are a victim of fraud or forced retirement?
Money is one of the reasons why some families don’t talk to each other. The bitterness can be caused by resentment, why my brother or sister couldn’t provide financial help when I needed it.
Peer Pressure Contribute to Family Debt
The credit card payments we make every month could be contributions to the emergency fund.
That is unavoidable because the so-called developed countries work on credit. Governments borrow money. Businesses borrow money. Ordinary people are also perceived to be rich because of their ability to buy this and that on credit.
Therefore, it is extremely difficult to say no to kids when they ask for clothes and gadgets their schoolmates have. More often than not, parents take the credit card option because peer pressure is a killer.
They go the extra mile to provide things necessary to make their kids accepted. It could be having a car at 18 or wearing designer clothes, especially in countries that do not have school uniforms.
There is no prescription for having a bank account called an emergency fund because many factors come into play.
Are you self-employed, are you supporting an extended family, do you have 20 pairs of shoes, do you have an expensive hobby, do you have more than three credit cards or earn minimum wage?
Whatever your situation, not having an emergency fund is playing with fire.