How to Start Your Emergency Fund on a Limited Income

Emergencies happen without any warning. Perhaps a series of typhoons damaged your house. Maybe you or a family member gets ill. Or it could be that you suddenly lost your source of livelihood. These terrible scenarios bring with them expenses that can cost you a great deal of money, which is why you need to have an emergency fund.

Your emergency fund should cover three to six months’ worth of your living expenses, including mortgage or rent, food, education, transportation, utilities, and healthcare. It serves as a safety net so that you have cash at the ready for expenses resulting from various emergencies.

Unfortunately, there are some factors that might prevent you from building your emergency fund, including a limited income. But don’t worry, even if your income is quite low, there are steps you can do to start raising an emergency fund.

  1. Set a goal.

Everything must start with a goal. When building your emergency fund, the first step is to know how much you need to save, so you can consciously set your sights on your target amount.

To determine how much money you should have in your emergency fund, add up all your potential expenses per month and multiply the amount you get by three to six months. If you don’t have a stable source of income, you should consider saving up to 12 months’ worth of your projected expenses.

The final figure you come up with might appear unrealistic or unattainable to you considering your limited income, but keep in mind that you’re not expected to raise that amount instantly. However, the sooner you start, the closer you’ll be toward your goal in due time.

  1. Develop a plan.

Having a plan that’s aligned with your goal can make a lot of difference in getting your emergency fund up and running. It’s not enough that you know what you want to achieve. It’s also important that you know how to make it happen with whatever resources you have.

For your action plan, you may include specific and measurable targets that can help you meet your goal over time. These include identifying how much of your income should be deposited into your emergency fund each month or finding extra work to supplement your income.

  1. Open a savings account.

Ideally, you should have a secondary savings account where you can put your emergency fund. If you need to withdraw for your usual expenses, you should get the money from your main savings account and NOT your emergency fund.

By having a separate savings account from the bank account you use to pay bills and transfer funds, you can keep your emergency fund intact. The only time you should allow yourself to withdraw from your emergency fund is when a critical situation happens.

  1. Automate your emergency fund.

When you have a low monthly income, it can be difficult to save on a regular basis. To start with, you might feel that you don’t have enough money to use for your everyday needs. But don’t let these things stop you from saving for emergencies.

What you can do is to automate your savings for your emergency fund. If you’re receiving your salary in your bank account, you can set up automatic saving and transfer a specific amount to your emergency fund at designated dates, without having to do it manually or physically going to the bank.

On the other hand, if you’re getting paid in cash for the work that you do, you can save a portion of your money using the envelope system, which requires you to put your peso bills in separate cash envelopes for different purposes, including one for savings. Make sure that you keep your savings envelope in a secure place at home.

By automating your emergency fund through any of these methods, you can grow your money even by setting aside small amounts – as long as you do it religiously.

  1. Save your excess in the emergency fund.

Some days, you’re doing well with your finances. You might have closed a sale, received a tax refund, or qualified for an incentive from your employer, leaving you with a few hundred or a few thousand pesos more on hand. Put this extra amount immediately into your emergency savings, as holding on to it might tempt you to buy things that you don’t really need.

You can also collect your loose change and put it into a coin bank. Once you fill up your piggy bank, you can then add your money collection to your savings or emergency fund.

  1. Stick to your plan.

You’ve already set your goal, developed a game plan, and started building your emergency fund through automation and other methods of saving. The only thing that’s left to do is to stick to your action plan consistently, regardless of whether you’re having good days or bad days in your finances.

It might also help to keep track of how much money you have saved. This way, you’ll be able to assess how far or how close you are to your goal, so you can fine-tune your saving strategy as needed.


Wrapping up, you don’t want to be caught unprepared for any emergency without enough funds to pull you through. Luckily, even if you have a limited income, you may still get a personal loan in the Philippines that you can use during an emergency.

That’s right! You can get instant cash for your emergency needs from Cashalo that provides affordable and quick-release money to rescue you from personal crises. Cashalo is ready to lend you a hand – and the cash to boot – when you need it the most.