“I want to start investing for the future, but I’m worried about seeing my cash dwindle…”
“How much should I actually save for emergency funds?”
I imagine many people share these concerns.
There’s an absolute “order” you must follow when building wealth.
This article will explain a roadmap for saving and growing money that even beginners can follow without getting lost.
1. Securing your “emergency fund” is the top priority
Before starting to invest, first solidify your emergency fund.
Many people say you should invest rather than save, but saving comes first.
It’s crucial to build up a solid cash reserve before investing.
This money protects you and your family in case of emergencies like unemployment, illness, or sudden troubles.
So, how much should you save?
It varies, but use the table below as a guideline for your emergency fund.
Emergency Fund Guidelines
| Occupation・Family Composition | Estimated amount required | Reason |
| Single/Office worker | 3 to 6 months’ worth of living expenses | Because reemployment is relatively easy |
| households with children | 6 to 12 months’ worth of living expenses | Due to the high risk associated with education expenses and fixed costs |
| Freelancer | More than one year’s worth of living expenses | To cover income fluctuations and the lack of sick leave benefits |
Point: Emergency savings are not “money to grow” but “money to protect.” Keep it in a bank account where you can withdraw it immediately, not in investments.
2. The “Golden Steps” for Savings and Investment
To efficiently grow your assets, ideally follow these three steps in order.
Step 1: Build Your Emergency Fund
First, save at least three months’ worth of living expenses.
Until you have this saved, hold off on investing.
Step 2: Separate Funds for Near-Term Use (Savings)
Money you plan to use within 3-5 years (e.g., wedding expenses, down payment for a home, car replacement) should be prepared through “savings,” not investments.
Investments carry the risk of losing principal, making them unsuitable for funds with a fixed usage timeline.
Step 3: Begin “Investing” with Surplus Funds
The amount remaining after setting aside your emergency fund and near-term planned funds is your true “surplus funds.”
Only then should you start long-term, regular, diversified investing using tools like the new NISA.
3. Why is investing without an “Emergency Fund” dangerous?
Starting investments with zero savings, driven by the anxiety that “you’ll lose out if you don’t start soon,” is not recommended.
Investing always carries the risk of losing your principal.
You never know when a market crash might occur.
If you have no cash during a crash, you’ll be forced to sell (cut losses) at a loss just to cover living expenses.
Having sufficient cash allows you to “wait it out” even when the market is unstable.
The golden rule of investing is to buy yourself “peace of mind” with cash, enabling you to stay calm and steady.
Summary: Where are you at?
- First, save three months’ worth of living expenses (the foundation of emergency savings)
- Secure funds needed within the next few years (goal-based savings)
- Use the remaining money for regular investments like the new NISA (asset management)
Simply following this order will dramatically improve your household finances.
Start by using a household budget app to track your monthly living expenses.
