No-one knows what is going to happen. In this article today, it is all about thinking ahead. Here is a quick guide to setting up an emergency savings fund.
What is an emergency fund?
An emergency fund is for the unforeseen or unexpected events that life throws at all of us like car repairs, doctor’s visits, death in the family etc.
What are the benefits of having an emergency fund when you are trying to get out of debt?
Your emergency fund can help you stop adding to your debt with each bump in the road. It is easier to pay extra money on debt right away when you have a cushion for unexpected expenses. You can use your emergency fund to handle these stressful and costly events and make it easier for you to stay focused on getting out of debt.
How big should your emergency savings fund be?
This depends on your personal circumstances. Because you are paying off your debt, l recommend saving for a start of R10 000 as fast as you can for those unexpected life events. Only when you have paid off your debt should you increase your emergency fund to cover three to six month’s living expenses.
What can l do to start my emergency savings fund?
Saving money isn't always easy. To start saving for an emergency fund you need to create a budget. From your budget, you are be able to see expenses that you can further cut back. Remember savings are savings and it does not matter how small.
It is important to do whatever it takes to save that first R10 000. Pack lunch for work instead of eating out, car pool, stick to a leaner grocery shopping list. You can sell whatever material possessions that are saleable. File your tax return in the hope of getting a tax refund. If it means taking up a part time job so be it to bring in the extra money and bring stability to your finances. For ideas on how to create a plan to start saving for the emergency fund, please see https://www.debtsage.co.za/blog/10-ways-get-out-de...
Where should you keep the emergency cash stash?
A separate savings account, or a savings pocket attached to your account provides easy, quick access to the cash stash. This is important as an emergency can happen anytime.