MBOMBELA – The Covid-19 pandemic moved swiftly and suddenly, for small business owners, the repercussions of the lockdown mean temporary staff layoffs and fewer working hours.
Over the course of the lockdown, government has introduced measures to protect workers and the vulnerable sectors which includes small, medium, and micro-sized businesses, contractors and informal sector workers.
The national lockdown has highlighted the necessity of a culture of saving in South Africa.
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“Many people in South Africa live from hand to mouth without a financial safety net to keep them afloat in tough times. To manage financial hardships, one ideally should have access to an emergency fund. This is a readily available source of money to help one cope with financial dilemmas such as a loss of income or a debilitating injury or illness,” said James Williams, head of marketing at short-term lender, Wonga.
Wonga provided a few tips to aid in improving financial well-being during extraordinary times such as the national lockdown.
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How much should you have saved for emergencies?
At the very least, an emergency fund should consist of enough savings to meet your monthly expenses for three months. Ideally people should aim to have three months of their salary or income in savings in the event of an emergency. This will help them to self-fund essential living costs like rent or mortgage payments, food and utilities as well as day-to-day expenses. It will also ensure that they are able to meet their monthly debt obligations without falling into arrears and compromising their credit rating.
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“This may not be feasible under the current lockdown but, when things return to normal, it’s a good idea to set some money aside each month for savings. Every bit you save will help in the event of an unforeseen loss of income, and will help you break the habit of living from hand to mouth.”
Where should you keep your emergency fund?
The trick is to put money into a separate interest bearing savings account as soon as one gets paid each month. A direct debit is the most effective way to ensure that the right amount is automatically set aside each month.
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People should aim to put their money into an account that has an interest rate that is either equal to or more than inflation. Look for an account that offers an interest rate of 6 per cent or more otherwise your savings may actually lose value over time.
A standard savings account or a tax free savings account are good options because they allow one to access money immediately in the event of an emergency. Although fixed deposit or 32-day notice accounts generally offer higher interest rates than standard savings accounts, they do not allow immediate access to your money which could be problematic when faced with a financial emergency.
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What to do if you don’t have an emergency fund and the lockdown threatens your regular income?
A total of R30 billion has been allocated to a special National Disaster Benefit Fund. This will pay monthly Unemployment Insurance Fund benefits of R3 500 to qualifying workers whose income has been impacted by the Covid-19 crisis, for up to three months.
In order to claim benefits, employees and their employers will need to fill out a series of forms including UI19 and UI2.7 (completed by their employer); UI2.1 (completed by themselves), UI2.8 (completed by their bank). All of these are accessible online at https://www.ufiling.co.za/uif/. They will also need to provide a copy of their ID document and a letter from their employer confirming their reduction in work time or temporary lay-off.
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