Moreover, this will help you cope with unexpected events or circumstances that may have negative repercussions if you haven’t planned for unforeseen circumstances. The general rule of thumb in building adequate emergency savings is to ensure that you have a list of three to six months of living expenses. While this may seem steep, it is necessary as it will help towards meeting your financial goals.”

Nicholson says when your money is tight, growing a savings fund may feel like a distant dream. “Without savings, an unanticipated expense can derail your budget and force you into debt. You may have to rely on a credit card or high-interest loan, which can lead to long-term financial strain.

“On the other hand, if your car breaks down and you need R8,000 for urgent repairs, an emergency fund allows you to cover the cost immediately. Similarly, if you lose your job, savings can keep you afloat while you search for new work.”

She says having an emergency fund provides financial security, can reduce stress and help you stay in control of your money. “Unexpected setbacks don’t turn into financial crises. Building an emergency fund on a tight budget requires discipline and patience, but it is achievable,” says Nicholson.

“Starting small, cutting unnecessary expenses, and making saving a habit, can result in substantial growth over time. Creating a savings fund isn’t just about having money in the bank. It’s about peace of mind, knowing that no matter what life throws your way, you’re better prepared to handle it,” says Nicholson.

Smuts says your emergency fund is largely influenced and dependent on your current lifestyle, household income, your dependents and expenses. “Therefore, it’s never too late to start saving to ensure that you and your dependents are safeguarded against unforeseen financial needs. Also, some financial institutions and retailers offer rewards benefits for being their client, take advantage of this and shop around for better deals,” she says.

Sidebar

The general rule is to have enough in your emergency savings account, says Sarah Nicholson.

This will help you cover three months’ worth of living expenses. “Ideally, it would be six months’ worth, though this is difficult for many of us. So, for example, if you need R30,000 a month for your needs, then you would aim to build up R90,000 in your emergency savings account.

“If possible, once you’ve reached that goal, you could try to build up to R180,000. Once you have built up an emergency savings account, you will channel additional funds into investments towards a retirement annuity to cover your retirement one day.”