The Importance Of An Emergency Fund

Remember the days with hotel quarantine and PCR tests not too long ago? As an expat family during the covid period, we were very familiar with them. Travelling was a costly affair with the ever changing border control rules of different countries. 

Our family was in Singapore in early 2022 to take care of some unexpected family matters. The vaccinated travel lane (VTL) was in place and you just needed to stay in a VTL hotel and do a self-swab test to leave the hotel each day. 

We spent a week in Singapore and were due to travel back to Indonesia where we were based at that time. We had taken our antigen test the day earlier and headed to the airport. My daughter (7 year old) at that time was quite used to these tests by now after 2 years of covid travelling. 

But at the airport check-in counter, there was confusion. For our type of visas, did we need just antigen tests or PCR tests? The (new) border rule was that citizens and work permit holders needed only antigen tests, while other travellers needed PCR tests. In the end we were given the bad news, even though we had work permits and visas, but as foreigners, we need PCR tests. The airline kindly offered to change the flights for us. 

My husband had to get back to his work the next day and my daughter was getting tired and restless. Travelling had indeed became a hassle. 

We took a taxi straight to the medical centre in the city where they offered express PCR tests - that means you can pay a big premium to get your test results within hours (instead of the next day). Each test kit costs SGD185 and there were 3 of us. So that’s SGD555 of extra expenses just for an unclear rule. Not forgetting the rapid antigen tests which we also took the day before. Those cost SGD150 for 3 of us. So in total we had paid SGD705 just for documents to get back to Indonesia. 

We went back to the airport to wait around for the test results. We had some lunch and my daughter was getting grumpy and fatigued. After waiting 2 hours or so, I was so happy to see the test results coming into my email inbox. I quickly checked my own first…negative…then my husband’s…negative…then my daughter’s…POSITIVE (in red). What?! Unbelievable! 

The antigen results we had yesterday were all negative. How did my daughter become covid positive overnight? 

I looked down at my tired daughter, who’s lying on my lap and touched her forehead…oh yes, she was feeling feverish.

It’s time for quick decisions. Where do we go since we can’t fly back to Indonesia now. 

We decided to take a taxi back to the original VTL hotel where we stayed. (Of course we were masked up and we informed the taxi driver so that he can properly sanitise his taxi after taking us.) The VTL hotel reception was surprised to see us back again for the day and asked us for the reason for checking in again. We told them about our daughter’s positive covid results. 

The reception swiftly apologised to us that they were unable to take any covid patients. Great! Now we are stranded in Singapore with our luggages and with a lethargic, covid positive child. We literally started calling up hotel after hotel, asking if they were able to take travellers with covid.    

We were lucky, we found a hotel that could take us and it was located just a few streets away. We dragged our luggages over and finally checked in. You see, costs were not even discussed before we checked-in. It was almost a desperate take it or leave it situation. We had to stay 7 more days in the hotel for my daughter’s quarantine before we could fly again…that was another four-figure cost added to our unexpected travel expense.   

My husband flew back then to Indonesia after settling us into the hotel. After all, he’s still covid negative and he has to get back to work! 

For me, I had the important role of making sure I stay covid negative while nursing my daughter back to health in the hotel room. Otherwise, our trip back to Indonesia will be further delayed and additional costs await…God forbid! 

Miraculously, I managed to stay healthy (self-testing daily) during the 7 quarantine days at the hotel with my daughter. My daughter had rather mild symptoms and was well but very bored to be cooped up in a hotel room. Our flights were re-booked. I kept my fingers crossed while I took my PCR test again the day before the flight…and it was negative (thank God!). My daughter had some exemption since she had spent 14 days now in Singapore and we managed to finally get back to Indonesia again.  

All in all, this whole unexpected trip and drama cost us 2 weeks and set us back by SGD7,000.

When travelling can become costly and a hassle…

Why am I sharing this story with you and highlighting all these expenses? Amidst the unfortunate drama and craziness during the covid period, we’re truly blessed that we had our finances in order, our emergency fund was there, when we needed it, so that we could face life’s challenges without worrying about money. 

A survey done by Suze Orman (a personal finance expert) in November 2022 indicated that only one in three Americans can comfortably cover a $400 emergency expense! (Source: Bloomberg article, 25 Jan 2023). That means 67% of the people cannot cover a $400 emergency! 

This statistics made me recall another incident that I saw many years ago at an emergency 24-hour clinic of a Singapore hospital. I was there in the middle of the night for some minor condition. While waiting for my turn,  I was observing a lady at the payment counter with her young daughter, probably around 5 years old. I’m not sure what her actual condition was but I think her daughter had a high  fever and was very lethargic.

The medical bill came up to about $200 or so. The lady was taken aback and it seems she didn’t have enough money to settle the bill. She humbly asked whether she could have half the medicine to reduce the medical fees. I wasn’t sure what the final arrangement was as it was my turn to see the doctor then. 

This episode at the hospital touched me deeply. It is sad when money (or the lack of it) creates stress and disrupts our lives when we need it the most. I’m sure all the lady wanted to do that night was to quickly get some medicine for the sick child and bring her home to rest and get her well again. But she had to worry about paying the medical fees.

However, we are responsible for taking care of our own finances, to face the lemons that life may throw us sometimes. That is why building an emergency fund is so important. In today’s volatile world, with recession and inflation and war in the news daily, we want to make sure that we can cope with any uncertainties. 

So what exactly is an emergency fund? 

An emergency fund is a sum of money that you put aside to cover any urgent or unexpected costs. 

That means unexpected expenses that occur out of the ordinary, day-to-day expenses.

These could be medical related, or unexpected situations like my covid travel story above or a loss of income, etc. Retail therapy from work stress will not qualify as an emergency unfortunately! Neither is a limited edition handbag or time-sensitive Taylor Swift concert tickets!  

An emergency fund should be at least 6 months of your regular monthly expenses, kept either in cash or in a fixed deposit, where you can easily access the cash if needed.

Wherever you are financially today, you can start to build our emergency fund. Start small, start today.  So how do you get started? 

1. Assess your average monthly expenses. 

Do you track your monthly expenses? You should have an idea of your spending each month.

2. Check your savings.

Are you able to save each month? If yes, do you have 6 months worth of monthly expenses already saved up? If yes, you can allocate those money to your emergency fund.

If you do not have the 6 months worth of monthly expenses, focus on cutting back unnecessary expenses as well as look for ways you can increase your income so that you can get to a healthy emergency fund. Save what you can and allocate it to your emergency fund.    

3. Keep that money liquid in cash or fixed deposits.

The emergency fund should not be invested in risky assets. It is ok for some money to sit in cash because that’s its purpose. 

For instance, imagine your emergency fund had been invested into risky stocks. During a stock downturn, if you had lost your job and needed to use your emergency fund, you may find yourself in a situation where you have to sell your stocks at a less than ideal amount. 

4. Rebuild your emergency fund if you had used part of it. 

When you had used up some of the emergency fund, make it a priority to focus on saving again until you have your emergency fund whole again.

5. Think about how you wish to make the emergency fund accessible. 

In a family unit, assuming both spouses are financially responsible, the emergency fund is best put in a joint account. However, if that is not possible, choose to put the funds in the account of  the  person who may need it the most. 

For example, in a family, if one spouse is a main breadwinner and the other is a homemaker, it may be a good idea to put the emergency fund in the account of the homemaker. In the worst case situation where something bad happens to the main breadwinner, the homemaker will be able to access the emergency fund during the crisis.   

Every family unit is unique, think it through, discuss with your family and decide how you will set up your emergency fund.