Being an expat abroad definitely has its share of surprises, so it's handy to have an emergency fund to lean on when the unexpected happens! Thinking "What is this emergency fund everyone is talking about?" Don't worry; we got you.
Well, it depends on who you ask. For some people, an emergency is a true life-or-death situation - a zombie apocalypse, for example. For others, it’s anything that requires immediate attention, like finding the last box of Excalibur Nacho Cheese Doritos in the depths of your local grocery store.
But as far as we’re concerned, an emergency is not buying a new iPhone or booking a last-minute getaway to Cancun. It should be something that falls outside your yearly budget - medical bills, job loss, or emergency home repairs are all good candidates for an emergency fund.
How much emergency fund should you REALLY have?
If you’re looking to build an emergency fund that won’t quit, it’s recommended to save at least 3-6 months of your living expenses. Oh no! How much is that? Luckily, there are online calculators to help do the math, so you don't have to.
To prepare yourself financially, it's suggested to start by stashing away 10% of your monthly income and increase that percentage until you have a good cushion in place. You'll be thanking your future self when an unforeseen financial emergency pops up and you're ready with cash to take care of it!
That's fair. After all, when you come from a different country, the decision of where to stash your cash can be stressful.
Fortunately, for expats, there two obvious options: keep it in a local bank account. This way, if your house does catch on fire or if you lose your job, you'll have money just a few clicks away! Alternatively, you can strengthen your finances with other savings accounts in different currencies.
If you've ever been tempted to use your emergency fund for non-emergency purchases, you're not alone. It's easy to justify dipping into our savings when we're feeling stressed or bored, but doing so can quickly deplete our funds and leave us in a difficult financial situation.
That's why it's important to have rules in place when using our emergency fund.
Just remember that your emergency fund should only be used for real disasters without fail (and no, a leaked Netflix account doesn't count). Paying off snowballing interest is essential, because something like debt can creep up on you before you know it - don't let it catch up to you! Lastly, make sure you only use the emergency fund when necessary and refill it again just as soon as you can.
The quicker you do this the better, since if another emergency occurs your funds need to be there for new catastrophes – not old ones!
Without one, life can be pretty chaotic should you ever find yourself in situations such as
- losing your job,
- dealing with pricey pet hospital bills,
- surprise healthcare needs
- or home repairs that call for immediate attention…
- oh, and don’t forget natural disasters too.
All in all, an emergency fund prevents floods of stress (at least financial ones!).
Well, you're in luck! Put away 10% of those hard-earned bucks each month and it won't be long until your emergency fund is ready for action. Don't worry - even if you have yet to start building one up, late bloomers are always welcome here! But...um... better get on that now so the universe doesn't scold your lazy butt.
If you're an expat, it can be tricky when you are dealing with foreign currencies. But there is hope; Instarem! With over 50 countries on our platform and simple click transfers with competitive FX rates and low fees, we can help make sure that every penny of your hard-earned money counts.