Being a young investor can feel like a whirlwind of money crunching and never-ending obstacles. We’re constantly trying to save for the future while balancing our social lives, skyrocketing petrol prices, and ever-shifting goals that seem to change as frequently as our passions.
A study published in 2022 by LIBF’s “Young Persons’ Money Index” revealed that a staggering 81% of young individuals experience financial anxiety, and that number is only increasing. It’s no surprise considering that most of us lack the financial know-how needed to navigate these challenges and end up falling into bad financial habits.
So, how do we juggle this pile of dreams and responsibilities while not falling victim to self-sabotaging financial habits? It’s a loaded question, and we’ll try to cover as many money matters as possible. In the following weeks, we’ll introduce you to three lifestyle changes that may not be “get rich quick” schemes, but they’ve helped me stay disciplined toward my financial goals while leaving room for unexpected opportunities.
Let’s start with the need-to-knows of an emergency fund…
Remember DC’s Justice League? If you’ve watched it, you know that Superman dies in the prequel, but fear not, he returns alive and well in the next movie. You may be thinking “what’s the point of this non-money-related movie metaphor?” In this scenario, Superman represents your emergency fund—a fund set aside solely for unplanned necessities.
Just like Superman, you build up your emergency fund through small but manageable contributions each month until you reach a comfortable amount that can soften the blow of any unforeseen crisis. Whether it’s a car in need of repairs, a broken laptop with all your precious student materials, or a medical incident that your insurance won’t cover, your “superman” fund is there to save you from drowning in debt. And while Superman may perish, your emergency fund can be topped up again over time, leaving your investments untouched and your cortisol levels low.
But how much should I have in my emergency fund?
The general guideline suggests that it should cover all your expenses for a period of 3-6 months. So, the exact number depends on your standard of living and the expenses you are liable for.
Remember, building an emergency fund is like assembling your own Justice League of financial security. Each member plays a vital role in keeping you safe from the villains of debt and financial turmoil.
So, start small, be consistent, and soon you’ll have your own league of financial superheroes ready to swoop in when you need them most.