Having money to use in an emergency is crucial in these times. If you invest in an emergency fund, you will be able to overcome the challenges life throws your way.
“An emergency fund refers to extra cash that is put aside, creating a bit of breathing space when consumers need it most. This type of fund must only be used for a crisis, a situation that affects one’s health or ability to earn money. An emergency fund should not be used for holidays, luxuries or other expenses,” debt management expert at DebtSafe, Wikus Olivier explains.
According to Olivier, the lack of an emergency fund can create a financial disaster, whereas having one can give you a financial advantage.
“It is therefore important to draw a line between savings for emergencies and savings for everything else.”
Olivier says there are quite a few ways to start saving for those unforeseen emergency expenses, such as:
- Have a proper budget in place and keep record of your expenses.
- Set an emergency savings target or goal for yourself each month, starting small and building it up from there.
- Trim on your monthly spending by eating at home and avoiding small daily purchases, like the cup of coffee you buy at the garage each morning.
- If you are in a good financial position, put your tax refund (SARS) away for emergencies or if you can’t save, use your refund to immediately close a gap somewhere.
- Do some spring cleaning around the house and sell unused items to add more money to your fund.
- Review memberships (like your gym costs) and contracts annually. There are various and possibly cheaper product and supplier options available.
- Review as well as reshuffle your credit facilities with the help of your financial planner. You’ll be amazed how much you can save.
- Recycle: Take your recyclable goods to local drop-off points and buy-back centres – the money may not be much, but every bit helps.
- Learn to do-it-yourself as you can save a lot of money that way.
- Consider increasing your income with a second job by using your existing skills such as tutoring, or becoming a waiter or chauffeur for cash. Although a second job is not a walk in the park, if you have the time and determination, the extra money can certainly help you save some cash each month.
- Downscale on the type of home and car you own as well as various luxuries that do not really add value to your life, simplicity can save you a lot of money.
- Review your budget on a regular basis and keep an eye on your expenses. You will then have a clear indication of where your savings’ goals are at, and you can adjust your emergency savings’ budget if you need to put in more money.
“Saving for an emergency fund is not easy but by taking the first step you set yourself off to a good start before those emergency bills start coming in,” Olivier warns. He says even a little is worth saving because if you don’t save, you’ll only be making more debt.
If you, however, are in no position to save for a crisis fund because of mounting debt, contact DebtSafe to assist you with their effective debt review programme.
