Manila, Philippines: Did you know that most Filipino families are just one healthcare emergency away from falling into poverty?
According to a study published in 2005, even a PHP 10,000 medical bill is enough to indebt 64% of the Filipino families surveyed, highlighting how fragile the finances of many Pinoy households are. This data was validated by the Bangko Sentral ng Pilipinas’ 2025 Consumer Finance and Inclusion Survey which found that only three in 10 adults are able to withstand financial shocks.
Unexpected expenses come in many forms, such as sudden car trouble, home repair due to typhoons and other natural disasters, emergency hospitalization, and even sudden job loss. These situations can happen to anyone, regardless of age, income, or occupation. While you can’t predict life’s surprises, you can prepare ahead for them. This is where an emergency fund comes in handy.
What is an emergency fund?
“An emergency fund is an essential financial tool. This refers to money put aside for unexpected financial expenses or sudden income loss. It is a way to prepare for unplanned circumstances to avoid being burdened financially,” shared JM Pabiton, Chief Finance Officer of CIMB Bank Philippines.
Your personal savings ≠ your emergency fund
According to Pabiton, a longtime banking professional and finance educator, your emergency fund should be different from your regular savings.
“It should be the most liquid account you have and not locked into longer tenor funds, meaning you can access the money anytime. The primary goal is not to earn interest,” he said. “While you can also keep it in your savings account, the intent and the purpose are also very different, as emergency funds must only be used for necessary and important expenses, not day-to-day items.”
How much should you save?
Starting an emergency fund can seem daunting, but the process can be broken down into smaller, more manageable steps, according to Pabiton. While it depends on the person, he recommends understanding your monthly expenses first. Log all costs, then identify which are truly necessary every month. List these necessities, calculate your total monthly expenses, then aim to have at least six months’ worth of these expenses saved to form your emergency fund.
“Personally, my benchmark is six to 12 months. This depends on your current situation. If you’re starting, start with one month. Then go for two months, three months, until you get good at saving. Once you reach your target, you can focus on growing your savings, investments, and other long-term financial goals. This gives layers to your money management.”
Where to keep your emergency fund
Once you start saving, you may be wondering where you should keep it. The most important consideration when deciding where to keep your emergency funds is ease of access, meaning your funds must be easy to transfer or withdraw in the event of an emergency.
“Thanks to digital banking and technology, it is easier now to access your funds. Certain banks also offer higher interest rates without locking in your money, so this keeps you liquid with the bonus of earning more interest. This makes these accounts a smart place to keep your emergency fund,” said Pabiton.
Things to keep in mind when managing your funds
While the journey varies per person, Pabiton also shared three important reminders to effectively manage and grow your emergency fund:
Leverage technology. Many banks now offer free and automatic transfers. Use this to your advantage to set aside money for your emergency fund first, then learn to live on the remaining amount. This way, you can build up the habit of saving for emergencies more easily and consistently.
Be firm with what counts as an emergency. It can be tempting to dip into your emergency fund when the going gets tough, but it is important to keep in mind that this fund is not meant to cover day-to-day spending in case your weekly budget runs out. Think of it as an exercise in budgeting and living within your means.
But while Pabiton does not recommend taking out money from your emergency fund when your regular budget runs short, there are certain exemptions.
“There are certain situations that you cannot anticipate. For example, the recent spike in fuel prices. Who would have known that prices would double that quickly? For me, it’s a basic commodity and a necessary expense, but no one was able to plan for the price hike. This is an example of how unexpected increases in cost of basic necessities can constitute a financial emergency,” he said. “From this experience, you can adjust the budget needed the following month to ensure you won’t have to keep taking from your emergency fund.”
Recalibrate the amount needed regularly. To be better prepared for the unexpected, your emergency fund should also be reviewed and adjusted regularly. Pabiton shared that if you’re still building your fund, it is best to review it every month.
For those with partners, he also stresses the importance of communicating openly and planning as a couple, as expenses need to be planned for the entire household. Whether a household has a single source of income or multiple income earners, it is important to have a clear view of the household’s overall financial situation to better protect its financial wellbeing.
Building an emergency fund is a journey that takes time and looks different for everyone. However, the most important thing is to take that first step and focus on achieving your goal. These small yet definite steps can help lead you towards financial freedom.
