You can never predict when an emergency may happen and what that emergency might cost you. It could even add to your already growing debt Be prepared and start saving up an emergency fund so you can be financially prepared for when life happens.
How to get started
It is ideal to aim for an amount large enough to cover 3-6 months’ worth of expenses in your emergency fund. It is ideal but hard to achieve. The first step is to figure out how much you spend each month; this will give you a good idea of how much you need to be putting away into your emergency fund.
Why so much?
The ideal savings amount is very large but this is due to uncertain times and an uncertain economy. Unemployment and retrenchment are an ever-growing worry… These unexpected hardships often happen at the worst possible moment so you can never be too prepared. Other emergency situations such as illness, disability or repairs to your house can often be expensive and there is never a good time for these things to happen.
Your emergency fund might seem like a large amount to save but it can end up getting you out of tricky emergency situations without adding to your debt.
Now that you know why an emergency fund is so important, you need to start saving! You start just like working towards any financial goal, you plan and work towards the objective. The first step, as mentioned previously, is to work out how much money you spend every month. Rent, or your bond and transport are often the biggest expenses.
Once you have calculated how much you spend each month, multiply that number by 3. This amount will be your initial goal to reach.
Make a 5-year plan and work out how much you need to be saving each month to reach your goal in 5 years.
Executing your plan
Cutting down on unnecessary purchases like vacations or expensive phone contracts can help to free up some income to put towards your emergency fund plan. The most effective way to start growing your emergency fund is by setting up a debit order each month as the lowest amount you need to save. Thereafter, if you end up with excess cash at the end of the month you can add it to your savings.
Starting your emergency fund needs to start as soon as possible, so start today, even if it is a small; amount like R25 at least you are starting towards your goal.
The bottom line
Once you have established your emergency fund you need to make sure you don’t get tempted to use it on other expenses that are not an emergency. You need to guard it. If your salary increases, you need to increase you monthly contributions as well.
Sign up today to be the first to know when our new savings plan launches. The perfect vehicle for your emergency fund.
Sign up to our savings product today!
Refer a friend!
E-mail your full name, contact details and your friends details to firstname.lastname@example.org , and we’ll do the rest!