Financial emergencies can crop up at any time, and usually when no one expects it. They tend to put a lot of stress on families in Saudi Arabia. Whether it’s a sudden medical expense, car repair, or job loss, it’s important to have a safety net. To lessen your financial stress, having some kind of backup especially when it comes to money is necessary. In a previous post, we’ve discussed the importance of having savings and setting money aside every month or from every paycheck. Consciously thinking of building your safety net is a good way to start.
1. Why is it important?
Life is full of uncertainties, and having a financial safety net provides a sense of security and peace of mind. This means being proactive and anticipating difficult times like a potential job loss. An emergency fund acts as a buffer. Having it allows you to address unexpected expenses without taking on additional debt or using your savings.
2. Setting up an emergency fund
Try to have enough money to cover your necessities for at least 3 months. The general rule of thumb is 3 to 6 months. You’ll need to determine what is a necessity for you and your family. Consider opening a separate saving account only for your emergency fund.
3. Prioritizing emergency savings
It can be challenging to allocate funds to an emergency fund when faced with other financial goals (for example: buying a home or going on vacations). You may never know when an unexpected event can rise and so having a safety net is important.
4. Build the fund gradually
For families on a tight budget, building an emergency fund might seem daunting. However, every little contribution matters. Set realistic saving goals and consistently contribute a portion of your income, no matter how small, to your emergency fund. Over time, these small contributions will add up, helping you reach your target.
5. Maximize income streams
Boosting your family’s income stream can accelerate the growth of your emergency fund. Encourage family members to take part-time jobs, freelance opportunities, or monetize their hobbies. Every additional income source can contribute to the financial security of your family.
6. Avoid temptations
It can be tempting to dip into your emergency fund for non-urgent expenses. But, do your best to not touch that money unless necessary. Set clear guidelines with your family about reasons why you all can use money from the emergency fund.
Conclusion
Creating a strong financial safety net is a crucial step in ensuring the well-being and stability of Saudi families during challenging times, like a recession. It’s important to prioritize emergency savings, set realistic goals, and stay disciplined. Families can navigate financial emergencies with ease and less stress while protecting their long-term financial goals. Remember, it is never too late to start building your emergency fund. There is nothing like the present! So, start today and take control of your family’s financial future.