If you have not yet considered having an emergency fund, this article is for you. Having a financial backup can make the difference between facing a crisis with peace of mind or falling into a spiral of debt. In addition to understanding its importance, we will explain how to calculate the ideal size of your fund and how to start building it today.

What is an emergency fund?

It is a reserve of money intended exclusively to cover unforeseen expenses, such as medical emergencies, major repairs, loss of employment or unexpected situations that could affect your finances.

Unlike a traditional savings account, an emergency fund must be:

  • Liquid. That is, easy to access in case of immediate need, just as mentioned above.
  • Insurance. One option is to keep it in low-risk instruments, such as savings accounts or conservative investments.
  • Separate. Because it should never be used for everyday expenses or impulse purchases, this way you make sure you can count on it in case of unforeseen situations.

Benefits of an emergency fund.

Having this financial tool is essential because:

  1. Provides financial peace of mind. Not having a financial cushion can create constant stress. An emergency fund acts as a safety net to deal with unforeseen events without worrying about how to cover them.
  2. Avoid getting into debt. Without a fund, you are likely to resort to credit cards or personal loans, which tend to have high interest rates. This could lead to long-term financial problems.
  3. Protect your long-term goals. Without it, you could be forced to withdraw money from investments or savings earmarked for your future, such as retirement, and lose valuable returns.
  4. It gives you job flexibility. If you face job loss, an emergency fund allows you to make more thoughtful decisions about your next step without feeling the pressure to accept any opportunity quickly.

Capital you should have in your emergency fund

Although the ideal size of the fund depends entirely on your personal circumstances, but a general suggestion to start forming it, is:

  • For employees on fixed incomes: 3 to 6 months of basic expenses. This includes rent or mortgage, utilities, food, transportation and insurance.
  • For entrepreneurs or self-employed workers: Between 6 and 12 months of expenses, as their income tends to be less predictable.
  • For families with dependents: Ideally, 9 months or more, since they have greater financial responsibilities.

An example of this is to assume that your basic monthly expenses are $15,000 MXN. If you are an employee with a stable income, your emergency fund should be between $45,000 and $90,000 MXN.

Steps to build an emergency fund from scratch

  1. Calculate your essential monthly expenses.
    Identify the minimum expenses necessary to cover your basic needs.
  2. Set a realistic goal.
    If your goal is to save $60,000 MXN, break it down into achievable installments, such as saving $5,000 MXN per month for a year.
  3. Open a separate account.
    Keep this money set aside in a savings account with competitive yields or low-risk instruments, such as CETES Directo in Mexico.
  4. Saves automatically.
    Set up automatic transfers from your main account to avoid the temptation to spend that money.
  5. Check and adjust regularly.
    As your circumstances change, adjust the size of your fund. If your expenses increase or you change jobs, consider increasing your goal.

Where to keep your emergency fund in Mexico?

An emergency fund should not only be available when you need it, but it can also grow safely while it is set aside. At Algo Global, we understand the importance of keeping your money safe and accessible without giving up the opportunity to earn returns. Here’s how you can manage your emergency fund with us:

  1. Low risk investment accounts:
    At Algo Global, we offer financial instruments specifically designed for those who seek to protect their capital without exposing themselves to aggressive market fluctuations. These accounts allow you to keep your fund safe, while generating higher returns than a traditional savings account.
  2. Personalized portfolios:
    Our experts can help you design a portfolio that combines immediate liquidity with conservative growth options. This means your emergency fund will be available when you need it, but it will also work for you when you don’t use it.
  3. Conservative investment funds:
    We have funds designed for people seeking stability and security. These funds invest in low-risk assets, such as corporate bonds, government bonds or short-term instruments, ideal to keep your fund protected.
  4. Real-time access and monitoring:
    With Algo Global, you can monitor the status of your emergency fund in real time through our digital platforms. This gives you total transparency and ensures that your money is always under your control.
  5. Personalized financial advice:
    At Algo Global, we believe that each client is unique. Our financial advisors will help you determine the ideal size of your emergency fund and select the most appropriate investment options for your needs.

Financial security is not only about saving, but also about making smart decisions about where to put your money. At Algo Global, we combine experience, technology and personalized attention to help you protect and optimize your resources.

Get started today and give your emergency fund the strength and performance it deserves. Ready to take the next step? Contact us and let’s work together on your financial plan!

Common mistakes when managing an emergency fund

  1. Failure to establish priorities.
    Many people make the mistake of using their fund for non-essential expenses. Clearly define what you will use the money for.
  2. Invest it in high-risk assets.
    An emergency fund is not for investing in stocks or cryptocurrencies; security should be the priority.
  3. Do not adjust over time.
    Expenses can change, so it is vital to update your fund regularly so that it remains adequate.
  4. Do not start it because it seems unattainable.
    Saving a small amount consistently is better than doing nothing. Every peso counts.
  5. Constantly withdrawing money.

Start your emergency fund

More than just savings, this fund is your financial shield in difficult times. It doesn’t matter if you start with a small amount; the important thing is to take action now.

Ready to start building your emergency fund? Make it part of your financial priorities for 2025 and enjoy greater peace of mind and financial stability!