Why you should build an emergency fund while you're in Debt Review

The short answer: because clearing your debt is only half the job. Without savings, you're one unexpected bill away from a catastrophe.

Most financial advice says the same thing: clear your debt first, then save. The logic sounds sensible - why build savings at 5% interest while carrying debt at 20%?

After ten years at Meerkat, helping thousands of South Africans through debt review, I've seen what happens when people follow that advice to the letter. They exit debt review debt-free, financially exhausted, with nothing in reserve - and within six months, many of them are back in trouble.

The culprit is almost never bad behaviour. It's a car repair. A medical gap payment. A month where the school fees and the rates bill landed in the same week. Without any buffer, a single unexpected cost forces people straight back to credit. And this time, the process of rebuilding is even harder because their confidence is shattered.

This is why we believe - and have seen - that building even a small emergency fund during debt review changes everything.

The conventional wisdom is missing something important

The "clear debt first" rule is based on a mathematical model that treats people like spreadsheets. Pay off the highest-interest debt first, minimise total interest paid, done. It's correct in theory. It misses the human part entirely.

Debt review in South Africa typically runs for 36 to 60 months. That is a long time to live with zero financial cushion. Life does not pause while you repay. Tyres wear out. Appliances break. Kids get sick. Employers downsize.

Every one of those events, without savings, becomes a potential credit emergency. And every credit emergency adds months - sometimes years - to the journey back to financial health.

A small emergency fund doesn't compete with your debt repayments. It protects them.

What the numbers actually look like

Debt review restructures your monthly repayments to be genuinely affordable - that is the point of the process. For most of our clients, that restructuring frees up a modest amount of disposable income that wasn't visible before.

We typically work with clients to identify an amount they can consistently set aside, even R200 to R500 per month. Over a 36-month debt review term, that adds up:

These are not life-changing sums. But R7,200 covers a new set of tyres, a month of school fees, or a medical co-payment. It is enough to absorb a shock without reaching for credit.

And that is exactly the point.

Why this matters even more at the end of debt review

The month you receive your clearance certificate is one of the most financially vulnerable moments in the entire journey. Your debt is cleared, but your credit profile is still recovering. You may not qualify for mainstream credit for several months. Your income hasn't changed overnight.

Clients who exit debt review with savings are able to bridge that period with confidence. They can cover the small costs of transition, re-establishing accounts, replacing items that have worn out - without panic.

Clients who exit with no savings often describe that period as "the crunch" - debt-free on paper but cash-squeezed in reality. It is in those months that people make expensive short-term decisions that set them back again.

What we do differently at Meerkat

From the beginning, we have approached debt review as the first step in a longer journey - not the whole journey. Getting someone out of debt is something many companies can do. Getting someone to financial wellness is something different.

That means, alongside debt review, we work with clients on:

• Budgeting that accounts for irregular costs, not just monthly bills
• A savings habit that starts small and stays consistent
• Credit life insurance that protects their repayments if they lose income
• Credit rebuilding guidance once their clearance certificate is issued

Our Save to Win savings plan was built specifically for clients who have never had a saving habit - or who have had their savings repeatedly wiped out by unexpected costs. It makes saving accessible and, frankly, a little more fun.

We don't measure success by how many clients exit debt review. We measure it by how many clients are still financially stable 12 months later.

The counterintuitive truth

Building an emergency fund while in debt review feels counterintuitive. You are already tight on cash. Every rand feels like it should go toward clearing what you owe.

But the clients who reach financial wellness fastest are not the ones who threw everything at their debt. They are the ones who built the habit of saving - even a tiny amount - while they were paying it down.

Because the habit is the point. By the time they exit debt review, saving is automatic. They don't have to start from scratch.

If you are currently in debt review and wondering whether it is even worth trying to save, the answer is yes. Start with whatever you can. R200 a month is R200 more than you had before.

Your future self will be glad you did.

David O'Brien

CEO, Meerkat

Frequently asked questions

Can I save money while in debt review?

Yes. Debt review restructures your repayments to be affordable, which often frees up a small amount of disposable income each month. Even saving R200 to R500 per month during debt review builds an emergency fund that reduces the risk of falling back into debt once the process is complete.

Why is an emergency fund important during debt review?

An emergency fund prevents unexpected costs - a car repair, a medical bill, a broken appliance - from forcing you back into credit. Without a buffer, a single unplanned expense can undo months of debt review progress.

How much should I save while in debt review?

Start with whatever you can consistently set aside - even R200 per month. The goal during debt review is not to build a full three-month emergency fund overnight, but to establish the habit and create a small buffer. Over a 36-month debt review process, R300 per month builds R10,800 - a meaningful safety net.

What happens to my savings when I exit debt review?

Your savings remain yours throughout the debt review process. When you receive your clearance certificate, those savings become your financial foundation - available immediately to cover the transition period before your credit is fully restored.

Does Meerkat help clients save money during debt review?

Yes. Meerkat's financial wellness approach includes budgeting support and savings guidance alongside debt review. We help clients identify a sustainable savings amount within their restructured budget, and we offer a Save to Win prize draw that makes saving rewarding.