Publish Date: 07/03/2019
What is an emergency fund?
Wouldn’t it feel great to have some money to fall back on when you get thrown into a financial emergency? Having a savings plan will give you peace of mind when faced with a major life crisis. That ‘savings plan’ is an emergency fund. Building an emergency fund is a very important step in your financial wellness. To do it properly, you need to understand the basics. We break it down for you below:
What is an emergency fund?
In simple terms, it is money you’ve set aside to be able to pay for life’s unexpected events without getting into debt. These emergencies could include fixing your car, a medical bill or urgent home renovations, even unexpected school costs.
Why you need an emergency fund
There’s two important reasons for getting an emergency savings fund started. Firstly, an emergency fund will help you avoid getting into debt. Secondly, the extra money will help to pay for any unexpected expenses. You’ll never know what’s going to happen and you don’t want to be at the mercy of all the possibilities. Your emergency fund will come in handy if you suddenly lose your job, for example.
Where to keep your emergency savings
An emergency can come when you’re least expecting it, so your emergency fund should be easily accessible. A savings account is a good place to start. That way, your money will earn interest and you can access it as and when you need it. Looking for the best bank to save money? African Bank offers a Notice Deposit investment account that allows you to earn interest from day one of opening it. With this Investment you can grow your money with extra deposits from as little as R100. You can then decide on your notice of withdrawal; either 7, 32 or 90 days.
Your emergency fund should be in a separate bank account from the one you use daily. In this way, you will not be tempted to use the money for needs that aren’t critical.
How much you should save
Your emergency fund savings should be big enough to cover 3 to 6 months of your living expenses. That will help you get through the first few months of a job loss or medical set-back.
Financial experts advise that you go a step further by building up an emergency fund that covers 6 to 12 months of expenses. This extra protection will come in handy if multiple bad events were to happen at the same time.
Tips to build an emergency fund
As time goes by, you might be able to save even more! If you get a promotion at work, why not allocate more cash to your savings?! Be sure to look over your budget for new ways to tighten the purse strings and boost the amount you’re saving for emergencies.
About African Bank
Our mission is to be a successful Retail Bank offering a wide range of products and services to the consumers of South Africa. The people who work for African Bank represent the diverse population of South Africa; therefore we are a reflection of you, of all South Africans. We seek to provide value - more than our consumers expect of us. We promise to live our purpose 'humanity through banking' in all that we do and we are confident that we can, because 'We are You'.