Saving money is always a good thing. But if your savings aren’t organized, things can get a bit messy when you need to tap into them.
Categorizing your savings lets you see where exactly your money will be headed, ensuring that you’re prepared for every sort of situation. This can also help you set savings goals more easily!
Here are six kinds of savings funds that everyone should consider sticking to.
Emergency Fund
This your cushion for emergencies—urgent home or car repairs, job loss, and other unforeseen happenings. This should cover 3-6 months of essential living expenses.
Since this money is meant to be in storage for a long time, it’s best kept in a high-yield savings account. This will help preserve the value of your capital against yearly inflation.
The most crucial consideration for storing your emergency fund is accessibility. This money must be available at a moment’s notice, so choose an account with multiple withdrawal channels (digital transfer, ATMs, remittance centers, etc.) near you.
Retirement fund
This fund is meant to sustain your lifestyle after you’re retired. A general rule of thumb is to have 7x your annual income saved by age 60.
It’s crucial to prioritize this fund while you’re young. Starting this off early, even with small amounts, will help you reap the benefits of compounding interest as the years pass.
If you’re a salaried employee, you’re likely contributing to your pension fund via salary deduction each payday. You can also grow your retirement savings by maximizing your monthly SSS contributions with your employer, or by opening and depositing in a BSP PERA account. Keeping your retirement fund with institutions like SSS will allow your money to grow in a tax-free environment, rewarding you with more return on your investment.
Health savings fund
This fund is specifically allocated for you and your loved ones’ medical emergencies. It can help finance expenses that may not be covered by PhilHealth insurance or HMOs.
Start your health savings off with ₱25,000 and increase from there. Like your emergency fund, store this in an accessible high-yield savings account.
Goal-oriented savings
Your goal-oriented savings are meant to fund expenses that you can’t fit into a single month’s budget. These include things like going on trips, getting that new gadget, or buying a condo. Save for them by calculating how much of your budget you can set aside for goals each month, and setting a reasonable deadline for each.
You can have multiple goal-oriented savings jars at one time! Keep these funds in separate bank accounts (or sub-accounts, if your bank offers this service), or track your savings per goal in a spreadsheet.
Flexible savings
Also known as a “fun fund,” this money is set aside to fund your occasional discretionary spending: gifts, salon appointments, gifts for your friends and family, and more. These kinds of expenses don’t have a set cost attached to them, but you know they’re coming up.
Your flexible savings help you finance out-of-budget expenses when they come. Set aside a little bit every month!
Financial freedom fund
These are funds to put towards various investments. Investing will allow your money to grow exponentially—something you can’t achieve with only savings accounts.
Try allocating 5-10% of every paycheck towards your financial freedom fund!
Final thoughts
This set of savings funds aims to address anything that we may need, which is why we recommend contributing to all of them.
It might be hard to contribute to all these funds at once, depending on your income and circumstances. Pace yourself and turn these into financial goals! Starting late is better than not starting at all.
How to beat Philippine Inflation