An emergency fund can be a lifeline when we are faced with a worst-case scenario. It can be very helpful for unexpected life events, such as loss of employment or income, illness, and accident. As the pandemic rolls on and is further complicated by the new Omicron variant, it’s more important than ever to have a safety net to deal with the unknown.

“Unexpected expenses can happen at any time. Having some money tucked away just in case can help us deal with financial hardship without sacrificing our assets. During the worst days of the Covid-19 crisis, for example, a savings buffer helped protect us against income loss,” says Kamolphu Phuredithsakul, assistant managing director at Thai Credit Retail Bank’s Micro Finance Business and Lending Branch Group.

But, for many Thais, the reality is very different.

According to a financial literacy survey by the Bank of Thailand (BoI), a large majority of Thai people don’t have enough money to handle an emergency situation for longer than three months, especially during such a crisis as the pandemic.

The study was carried out in collaboration with the BoI and the National Statistical Office of Thailand on 11,901 households nationwide in the fourth quarter of 2020 following Organization for Economic Co-operation and Development (OECD) guidelines. It was aimed at studying financial behaviors, levels of financial literacy and gauging attitudes amongst the respondents.

With respect to building up savings, the survey found 38 percent had enough savings to cover an emergency situation for more than three months if they did not work. About 29.2 percent reported that they only had enough money to cover their expenses for less than three months and 32.8 percent said they were not sure if they had enough money to cover their expenses for three months.

Some 62 percent said they were not sure and did not have sufficient savings to cover an unexpected expense. The findings highlight the importance of having emergency funds, Nawaporn Maharagkaga, assistant governor of the BoT risk management group, says.

She urges people to save more and create an emergency fund.

How much should we have in an emergency fund?

Old personal finance advice supports having at least three to six months of expenses in reserve in preparation for an unexpected situation. But during an economic downturn such as that following the pandemic, some financial experts and banks, including the Thai Credit, recommend increasing that safety net to six to 12 months worth of expenses.

Kamolphu however stresses that the amount people should save in an emergency fund varies from person to person depending on factors like their expenses, current income, and career stability.

Civil servants who have more job security should have at least 3 months of expenses in their reserves to be safe. Employees on a fixed income should hold at least six months, while freelancers and merchants should save even more, say up to 12 months.

Only you can judge the right figure. Just set a goal that makes you feel financially secure, he says.

When it comes to setting money aside, Kamolphurecommends saving a minimum of 10 percent of your income each month.

“But more is better,” he notes, urging people to build and improve their financial literacy.

“Without financial planning, you may spend more than you earn and have no savings at all,” he says.

Don’t feel overwhelmed if saving 12 months of living expenses feels like an unreachable goal right now. You can start small and follow the advice of experts to build up your savings.

Building up a nest egg

Saving money and developing savings is an uphill task in these times when the convenience of digital payments fuels consumption and spending, often at the expense of savings. Reaching your goal requires not only financial understanding and financial planning but also strong commitment and discipline.

“We should save before spending,” Jakkapong Mespan, aka the Money Coach, writes on the Money Coach’s Facebook wall as he shares tips and tricks for saving money and building a nest egg.

He’s written a book about it too. Titled “Money 101: Steps to Building Financial Success Even Starting from Scratch, it is currently on the best-seller list.

Jakkapong echoes Kamolphu’s recommendations for saving.

To effectively create a reserve, the guru suggests automatically shifting a percentage of your earnings into a fixed deposit account. If you already have a savings account at a bank, you can open a fixed deposit account there and set up a standing order. This means you don’t need to budget or even remember to save money every month.

Then, set a daily limit on how much you can spend.

The formula is simple. “It’s just your income, less your savings and the fixed expenses, divided by 30 (the number of days in a month),” he writes.

It can be broken down into five main steps:

For example, if you earn 30,000 baht a month and your fixed expenses come to 12,000 baht, the calculation is as follows:

30,000 baht (income) – 3,000 baht (saving) – 12,000 baht  (fixed expenses) = 15,000 baht (monthly personal expenses)

15,000 baht is then divided by 30, meaning that your daily budget is 500 baht.

Try to stick to your goal but don’t be too hard on yourself, Jakkapong notes. Some days you may spend over the average and on others, you may spend less. So, allow yourself some flexibility.

Setting a daily budget will let you know the average amount you’re supposed to spend each day in order to balance your budget as efficiently and effectively as possible, he adds.

The money coach also suggests using a piggybank or a saving pot. He says he puts all his 5 and 10-baht coins into piggy banks. When they are full, he invests the accumulated money in a mutual fund.

“Don’t underestimate this traditional method. Most people think it’s just a few baht, but a few baht added up over time into big savings. Without even thinking about it, it’s being set aside,” he says.

This saving method does really work for him and many people.

The story of a woman and her boyfriend who built their saving using the piggybank method is a case in point.

Late last month, a Facebook user using the name “Kapook Noi Noi (literally a tiny piggy bank)” shared ways to build up savings and posted a picture of the money they had saved up in piggy banks on a page called “Mahasajan Chan Om Ngeng” (the miracle of my savings), which encourages people to share their savings tips.

The couple has a mom-and-pop shop. They saved every 50-and 100-baht notes they took and put them into jars. They found that they had managed to save about 600,000 baht in just one year.

Meanwhile, financial expert and YouTuber Thanyawan Srichanya says thinking before you buy can help you save money. She reminds us on her YouTube channel “Than Money Trick” that before deciding to buy something new, we should ask ourselves if we need it or just want it and whether we already own something similar.

Cutting “The Latte Factor” can also add up to big savings, she adds, pointing out that stopping the spending on small purchases like a latte can add up to a large amount of money over time.

Thanyawan has applied this approach in her own life, cutting down on the 50 baht she was spending every day on iced coffee and putting the cash into savings.

“Even though you’re only contributing a few baht each day, that sum will add up over time,” she says.

by Veena Thoopkrajae with additional report by Sukhumaporn Laiyok