Emergency fund vs Saving fund: What should you use to recover from calamities?

Anyone who has been through a life-altering situation understands the immeasurable value of a savings fund. This financial cushion can protect you from unexpected and urgent situations while also safeguarding your opportunity to recover financially. Having a fund dedicated for unforeseen circumstances is an important aspect of a healthy financial life

However, the appropriate approach to facing an emergency is through an emergency fund. If you maintain just one savings fund, you would leave yourself penniless if an emergency or situation will eat up all the money you’ve saved so far. 

Emergency fund vs savings fund

An emergency fund is an amount you set aside for emergencies, just like the name suggests. Saving funds on the other hand is meant for purpose-based spending and investment. This includes any big-ticket expenses you anticipate or plan for in the future such as retirement, college, marriage, hard asset investment, vacation, house, car, and more. 

A common misconception is that the “savings” and “emergency funds” can be used interchangeably. But this strategy is more likely to hurt financially than being a long-term benefit. If you use your savings as an emergency fund, you drain your primary source for long-term and ROI-driven funds. Your savings may help pay off any outstanding debt or medical expense today, but your future needs will be in jeoperdy without the right financial cushion. 

This is exactly why you should have two separate funds to ensure you do not fall into debt from exhausting your credit card or drowning in various loans.. 

The fund meant for unplanned situations: Emergency fund

An emergency fund is your safe haven in times of emergency. This fund is a backup plan you can safely rely on for situations such as loss of income, health emergencies and accidents, natural disasters or calamities, sudden household expenses, and more.

Create a plan to identify situations that fall under emergency and other expenses according to your lifestyle and goals. It is crucial to have a clear purpose for your emergency fund and others to avoid the temptation of using any of them for purchases and situations not intended for them. This will also ensure you are financially protected even before any emergency or disaster strikes, adding to your peace of mind. 


The right time to start an emergency fund

The right time to start building an emergency fund is today. You cannot build the fund overnight so the sooner you start, the sooner you protect yourself and your loved ones. 

Plan out the fund so it can sustain you for a minimum of 6 months without an income. Ideally, an emergency fund is equivalent to 3-6 times your monthly income. Revisit your fund every 6 months to ensure it aligns with your lifestyle and needs, and continue to add to it. 

Smart uses of savings funds

It is just as critical to maintain a savings fund as much as an emergency fund. Your savings is your avenue to invest in assets that can bring high returns or for a little indulgence to reward yourself and your family. Here are some ideas for putting your savings to good use:

Home Maintenance 

Use your saving funds for household maintenance expenses like electronic appliance repair, broken furniture, home improvement projects, and big purchases that will help your life be more comfortable. Create a list of short-term and long-term plans for your house and identify which purchases are a priority to help you maintain a reasonable spending schedule without totally depleting your savings. 


Everybody wants to retire comfortably, where you can maintain a certain lifestyle without having to limit yourself on what activities to do and enjoy. Using your savings fund to invest towards a retirement goal will let you enjoy life without worrying about finances or relying on anyone else. 

Personal Goals

Your hard-earned money should go towards building the future you’ve always wanted. Whether that includes getting married and starting a family, traveling to your dream destinations, investing in more education, or buying a home and car, your savings fund will help kickstart your dreams as you build them. 

Even with an emergency fund or savings, there are times when you might need additional financial assistance. For such situations, financial service providers like SAVii provide aid, whether as a last resort or as a crutch to help you get on your feet.

SAVii is a salary finance platform that provides hardworking employees easy access to cash for emergencies or other expenses. Get a salary loan with SAVii if you are in need of some funds.