When you receive your first pay, you shouldn’t immediately splurge on material products that you’ve always wanted to own. Instead, you need to first build up your emergency savings. Doing this will give you a better appreciation of your job security, inculcate good budgeting habits and enable you to start saving for your retirement.
Ideally, you should build your emergency savings to be at least six to nine months of your average monthly expenses. For example, if you spend about $2,000 a month, you should aim to set aside at least $12,000 to $18,000 in emergency savings. This savings should be on top of anything else that you may also be saving towards, such as your wedding, an end-of-year holiday or even renovation works on your BTO flat.
Building a pot of emergency savings can be important for your career for two main reasons. Firstly, in the unexpected event that you lose your job, for whatever reasons, having sufficient emergency savings will give you ample runway and allow you to remain calm while seeking another suitable opportunity.
This is in stark contrast to a scenario where you don’t have emergency saving and may feel pressured to take the first offer that comes your way or, worse, take on debt to support your family.
Secondly, having sufficient emergency savings can also help you make better family and/or career decisions. For example, you may be considering a new job today that pays less, but offers better long-term prospects or enable you to take up work that’s more meaningful or interesting to you. You may also want to take on less time-consuming work for a short stint if you’re planning to care for your baby in the initial months or your parents.
Knowing that your short-term financial commitments are covered gives you the confidence to make the best decisions for your career and your family.