Covid-19, A Blessing in Disguise: Emergency Fund


A global pandemic is hitting the world for the first time in a century. That’s 100 years ago. It is best to say, not many living humans have seen this scale of crisis in their entire life. The Spanish flu, also known as the 1918 flu pandemic, was an unusually deadly influenza pandemic. Lasted for almost two years, it is said to have affected around 500 million people—about a third of the world's population at the time.

100 years later, another virus attacks the world. This time around, advanced medical technology and preparedness from past experience help nations to better handle this pandemic. But unless the vaccine is found, the best method for now to fight this war is through social distancing and lockdown. Nations around the globe are forced to take the action of limiting everyone’s movement in order to minimise the spread of the disease. While this works well for health in general, it brings harm to the economy and personal finance.

Many have been affected badly by the pandemic—economically and financially. Businesses cannot go as usual, and as a result, people are losing their jobs because of this. In best-case scenario, things will get better in six months or so. The worst-case scenario is, on the other hand, it might take us one to two years before business can resume normally.

Not much that we can do to turn things around, so it is best to take a deep breath and reflect. Hitting the panic button now brings us to nowhere. Instead, we should broaden our view and try to look into things from a different perspective. Every cloud has a silver lining, and there’s always a blessing in disguise in every misfortune. Gaining financial knowledge for a better tomorrow sounds like a good plan to begin with.


We have been listening to this phrase—emergency fund— for years, but what do we know about it? What are we saving it up for, and when can we use it? The real question is, what defines an emergency? There’s always an argument as to what really is an emergency. If there’s a car breakdown, can we use the money to do some repair? If there is a one-day sale for an item you crave the most, is it an emergency for you to buy it? How about quitting your job? That sure allows us to tap into the fund, right?

There is no better time to learn about emergency than during a crisis. Emergency fund or emergency savings is a fund for emergency. Significant spending may be incurred when unexpected occurrences happened, thus the fund ensures that we will have sufficient amount of money to buffer all the extra costs in case an emergency takes place. The rule of thumb states that 6 to 12 months’ savings is sufficient for one to have. This can be a good start for those who still have none.

That is the textbook definition, of course. But when it comes to reality, we define emergency differently. It may sound funny when one can consider a one-day sale, a take-it-or-leave-it deal as an emergency (because it happens unexpectedly) but this is the reality. Therefore, defining what qualifies as emergency first and what is not, is important before we proceed further.

For starters, that one-day sale is surely not one.

While a car breakdown is definitely an emergency, we can plan our finances better by having a specific fund just for this scenario. A RM1,000 fund for ‘minor emergency’ can be a good start. Anything above that amount usually will be covered by motor insurance—so make sure to have one. This can help you to kill two birds with one stone; get the car done without breaking the bank.

Quitting a job and losing a job is another ‘emergency’ that needs to be defined properly. One can be a choice, another is an unfortunate event. An emergency fund of 6-12 months’ savings may allow us to survive for up to one year if we are out of job. However, there are various reasons that can cause us to be out of employment.

A regretful and unexpected event such as a retrenchment is a good example of how emergency fund can be useful. Quitting your job, on the other hand, has different perspectives. If you are forced to quit your job to take care of your parents, you have a good and solid reason to use the emergency fund. If, however, you quit your job just because you don’t feel like working, then there is some argument to call it an emergency. Maybe, a crisis that happens once every 100 years can show us what emergency really is.

At the end of the day, while the money is all yours and it is all up to you how you want to use it, this pandemic can be the best vaccine to help us learn better about ourselves. To learn what is emergency and what is not. To learn to treat occurrences that happened in life fairly as we manage our finances. Covid-19 can be a blessing in disguise after all, if we treat it as one.

Azraei Muhamad is the author of Enam Angka Menjelang Dua Puluh Lima. He helps youth to take responsibility of their own financial and manage them better. This article written by the author may not necessarily represent the opinion of AKPK.