You’ve probably heard of the term “emergency fund”. But what exactly is it and why do Singaporeans need the fund?

More often than not, the reason why you’re looking for a job or running a business is that you need to have an income, right? Money that you can use to pay your bills, loans, mortgages, to buy a bag, shoes, or the latest laptop/phone.

But have you thought about saving some that you can use in case of emergency? What if you were to lose your job one day, or if you were to fun into financial problems for your business?

How will you manage your fixed monthly spending? Will you have enough money or will you need to take a short-term loan to get by?

Recently, OCBC had a survey and asked 2,000 working Singaporeans ages between 21 to 65 about saving. As expected, the result shows that only 28% of them are saving a portion of their monthly income. And “saving” doesn’t necessarily mean that all of these people are putting that extra money on the emergency funds.

Some will even apply for a loan in order to have the wedding of their dreams.

But what do you think is an emergency fund and why does every Singaporean need one? As you go along, you’ll have a better understanding of why this is important and what are the things you can do to have one.

How Much Should You Set aside for Your Emergency Fund?

Have you heard the saying, “expect the unexpected”?

Or, Murphy’s law: “Anything that can go wrong will go wrong.”.

This is the reason why you need to have an emergency fund. Although we don’t want it to happen, a time may come that you might lose your job and will no longer have a source of income, or unexpectedly, you’ll have additional expenses for food or medicine. You’ll never know.

How much emergency fund is enough? Where should I put my emergency fund?

For these cases, you need to have an emergency fund that covers at least 3 to 6 months of your expenses.

For example, your monthly expenses are $1,500. Therefore, you need to save $4,500 up to $18,000 to have enough emergency funds.

If you do not have this amount of money available, U Credit can help. You can apply for a fast cash loan with U Credit, one of the best licensed moneylenders in Singapore to get through the rainy days.


How Do You Build an Emergency Fund?

Now, this is where the challenging part comes in. It’s how you’ll build an emergency fund.

To come up with a realistic amount that you can save for emergency funds, you have to assess your finances first. How much should I save per month? You have to consider your income and expenses.

Let’s look at this example:

For instance, your monthly income is $4,000 and your expenses are $1,500:

$4,000 – $1,500 = $2,500

Therefore, S$2,500 is going to be your cash flow.

From here, you can decide how much money you’re going to save for your emergency fund. But remember you need to have at least $9,000 for that.

So let’s say you decided to save $500 so you still have enough money for your leisure, that’s perfectly fine. However, it’ll take you some additional time to build your emergency fund.

If you’ll only save $500 a month, that means it’ll take you 18 months (1.5 years) to produce enough funds. Whereas if you’re going to save the entire $2,500, it’ll only take 3.6 months.

Nonetheless, it will still be your decision. What matters is that you actually start saving for your emergency fund.


3 Strict Rules to Follow Before Tapping into Your Emergency Fund


Of course, it is called an emergency fund for a reason and you shouldn’t just spend it whenever you feel like it.

When you start saving for this, you have to set at least three strict rules before tapping on to your emergency fund.

1. Don’t use it to pay off debt

Sometimes, it can be tempting when seeing you already have enough money to pay off a debt. However, using your emergency fund isn’t a good idea. You already have a monthly budget for that, you just have to be patient. Eventually, you’ll finish paying your debt. Just never think of using your emergency fund for it

2. Use it only when it’s really important

“Important” things are those that you truly need and not your wants.

So, you have to make sure that you keep yourself from using your fund to go shopping on a sale or to eat out to celebrate. Those things are great and you don’t always need to hold yourself back from doing these. But you have to make sure that you have extra money for it without using your emergency fund.

For example, the emergency fund is often misused for home renovations. In actuality, if you need extra cash for your home renovation, it might be better to apply for a home renovation loan instead of eating into your emergency funds.

3. Never use it for investment

When someone offers you a business that is worth investing in, you can certainly do it. Just make sure that you won’t use your emergency fund for it. Investing money in business doesn’t mean you’ll already get a profit right away. It takes time and hard work and you’ll never know what can happen while you’re in the process of growing this business.


5 Real-Life Situations That Need Emergency Funds

Next, let’s discuss some real-life situations wherein you could certainly use an emergency fund. The use of this spare money isn’t limited to these examples. But these will hopefully help you understand better why an emergency fund is really important.

You’ve Lost Source of Income

Earlier, we’ve mentioned that your emergency fund should be at least 3 to 6 months’ worth of your monthly expenses. Losing your source of income such as your job or business is one of the reasons why it should be calculated that way.

When you successfully build it, you’ll be able to sustain your expenses and even be able to look for another way to earn more money.

Any Medical Emergencies

When things get worse and you’ve got into accidents or you get sick, your emergency fund is going to be a big help for you. Although you can try your best to avoid this by being healthy or keeping you and your family safe, you still have to have enough funds for it.

A Car Repair

If you’re someone who relies heavily on your car for transportation, it is such a headache when it suddenly needs a repair.

So, it will be such a great relief to have an emergency fund to use when this happens. Just make sure it is for repair and not for an upgrade. That’s going to be a different story.

Unplanned Pregnancy

Welcoming a new member of your family is great. But when it happens when you’re not expecting it, you will need to have a fund to use for laboratories and checkups that aren’t yet part of your monthly expenses yet. And until you’re able to adjust your budget, at least you have spare money to use.

Family Emergencies

Well, your emergency fund isn’t just for you but for your family too. Therefore, in case someone from your family needed one of the four real-life situations mentioned, then they have money to use too.



To sum things up, an emergency fund isn’t the same as your savings or investment. It is the money that needs to be accessible whenever necessary.

Unlike the other kind of funds or savings, you need discipline and determination to build it. You always have to keep in mind the main reason why you’re doing it. You can either start saving more, increase your income or generate a passive income to improve your financial health.

Being prepared is better than being sorry. When financial emergencies hit and it’s too much for your bank account, you will need to apply for a loan to survive.

U Credit, a 5-star licensed moneylender in Singapore offers loans with fast approval to help you.