9 Mistakes People Commit When Building an Emergency Fund

Updated: August 24, 2023

It’s important to have an emergency fund, and the sooner you finish building yours, the better your finances will be.

Short-term medical expenses, important home repairs, job loss — these are just a few circumstances when your emergency fund becomes useful.

That’s why having one can make your life less stressful, knowing that there’s money you can immediately use if in case anything unexpected happens.

An emergency fund is your SWAN fund — your Sleep Well At Night fund.

However, despite its importance, many are still without one. The reasons vary, and below are nine of the most common mistakes that are preventing them from building their emergency fund.

1. I’m still young.

It’s easy to dismiss building your emergency fund when you’re still living with your parents. You’re probably at the top of your health too.

However, it’s good to start early because saving money is a habit that will benefit you throughout your life. Think of it as preparation for when you finally move out of your home and become independent.

2. I’ll start when I get a salary increase.

If you can’t save money with your current salary, chances are high that you won’t be able to save money later when your salary increases. When it comes to saving money, effort is important.

Saving money to build your emergency fund becomes easier with every month that you try. So don’t delay.


3. It’s not my priority now.

In my opinion, your necessary expenses are the only thing that’s more important than building your emergency fund. Of course, you have to prioritize your present needs.

However, saving money is a way to fund future needs. That’s why it should come second in your financial priorities. If you’re living comfortably now, then saving money ensures you’ll continue to live comfortably in the future.

4. I need to pay my debts first.

It’s always a dilemma — save money or pay debts. I believe that you should do both. This means saving money AND paying your debts at the same time.

It will take a little bit longer to get out of debt this way. But also, saving money ensures that when a financial emergency happens, you won’t get into new debt.

5. I have a credit card anyway.

Never think of your credit card as your emergency fund. While it is a viable source of cash for emergencies, I strongly suggest that you make this the last option.

I’ve met people who used their credit cards to pay for a minor medical procedure and then spent the next five years getting out of that debt. Don’t let this happen to you.

6. I can always borrow money from my parents, relatives, or my friends.

There will always be people who are willing to help when you need it. But be considerate and realize that they, too, have their financial obligations.

And even if they’re well-off to lend you money, remember that one of the hardest things to pay in life is the debt of gratitude. Mahirap bayaran ang utang na loob.

7. I have some money saved, I think that’s enough.

Contrary to what most people think, there’s a formula you can follow to calculate how much savings you should set aside as your emergency fund.

At the most basic level, it’s six months’ worth of your regular expenses. So if you spend around P20,000 per month, then your emergency fund should at least be P120,000.


8. I’d rather invest than save money.

All investments have risks, and the best way to minimize these risks is to have time on your side and let your money grow inside the investment for several years.

When the stock market goes down, and you suddenly need money, you’ll then be forced to sell at a loss. I’ve seen this happen too often to people who invest without building an emergency fund first.

9. I’ll just worry about the money when an emergency happens.

This is the worst mistake. It’s like driving a car without wearing a seatbelt and saying that you’ll just worry about how you’ll get to the hospital when you run into an accident.

Financial emergencies can happen at any time, and it happens to everyone. So start saving money and build your emergency fund. I guarantee it’s a decision you’ll never regret.

What to do next: Click here to subscribe to our FREE newsletter.


  1. Number 8 is the most dangerous, especially for those who are “financially savvy.” (I admit, I’m guilty of it. I quit my job last Feb. and have no other source of income aside from my investment, and I might need to tap into my capital soon. Here’s hoping I build my business up before then.)

  2. Commenters before me admitted to the same sin I commit, I would rather invest. Bank interest rates are abysmal. The cash sweep fund included with my investment accounts earn slightly less than bank interest here in the Philippines but the money is instantly available should I want to pounce on a short term trading opportunity. In the event we have an emergency requiring cash, I can make an on-line transfer from one of my trading accounts to the cash account with linked to a VISA card. The only downside is that it normally take two business days for the ATMs here in the Philippines to recognise that there is cash available on the VISA card. A call to my brokerage firm in the US, thankfully on a toll-free number they provide, will allow me to ask for an account “reset.” and cash will then be available immediately. A bit of extra effort but our money works for us 24/7. My only real worry would be a situation where a hospital or other important place was unable to accept plastic money. I will admit there is nothing like having a little something under the mattress for those times when everything including the ATMs are off-line.

Leave a Reply

Your email address will not be published. Required fields are marked *