An emergency fund: a savings priority
When it comes to getting your money matters in order, financial experts often suggest starting an emergency fund – and with good reason. It’s unlikely that you’ll be able to budget for every eventuality; sometimes life just happens, and you have to cover an unexpected and hefty expense. If you have an emergency fund in place, you can pay these costs without putting them on your credit card or having to take out a loan.
So, what are some instances where an emergency fund could end up being a financial lifesaver? Consider whether you’d have enough money to tide you over if you: lost your job (you could also consider salary protection to safeguard you in this instance), needed to pay for urgent car or home repairs, or had unexpected medical costs that weren’t covered by your medical aid.
How to build an emergency fund
Here are some tips to help you reach your savings goal.
Decide how much you want to save
Have a look at your finances and decide how much you want to have in your emergency fund – experts suggest having about three to six months’ worth of living expenses saved up. Then work out how much you can realistically put towards this goal on a monthly basis, and get started. Try not to feel overwhelmed or that you need to build up your fund right away – just keep at it and increase your monthly contribution where you can, and you’ll soon see your fund start to grow.
Keep it separate
It’s a good idea to keep your emergency fund stashed in a savings account, where you’ll be less likely to use it for day-to-day expenses. Keeping it in a separate account will also help you track your progress. And remember, you ideally want to keep your emergency savings in an account where it can earn some interest.
Set a tight budget
If you’re not budgeting already, now’s a good time to start. Review your income and expenses, and remember to include your monthly emergency fund saving as a non-negotiable payment that you make to yourself. While you’re at it, try to look for areas where you can cut back, and then add those savings to your emergency fund, too.
Save any extra cash
If you come into a bit of extra cash, whether through a tax refund or a bonus, try to resist the urge to spend it and stash it in your emergency fund instead. While the temptation to splurge on a new gaming console or surfboard might be strong, it won’t give you the peace of mind that comes from knowing you can weather unexpected financial storms. Plus, you can always fork out for that Xbox or longboard once your emergency fund is in place.
If you’d like to find out about cover from Standard Bank’s direct life insurance services, get a quote or request that a customer service agent call you back.