The concept of an emergency savings is simply a stash of money set aside to help you manage those surprise expenses that may crop up. These emergency funds could help you from incurring excessive debt in your time of need.
“Increasingly, we find that we are over-burdened with surprise and unexpected expenses which can lead to indebtedness as disposable remains under pressure. Building and maintaining an emergency savings fund gives you an opportunity to meet unexpected financial obligations like family emergencies, doctors or even education costs,” says Ester Ochse, FNB Wealth and Investments, Product Specialist.
It’s never too late to start saving. You don’t have to put a lumpsum of cash away each month; rather start small. The rule of thumb is to pay yourself first and put away between 10% and 20% of your salary monthly. This step is crucial in the saving process.
Prioritise your expenses and identify your goals so you know what to focus on. Savings can be overwhelming if not managed correctly. It is important to have financial goals to drive the habit of saving. Both short and long-term goals are important in ensuring that you meet your objectives for emergency funds. Important is also to list the fixed expenses first, then variable expenses. Non-essential costs should be included last and only when there is enough money to pay for them. List your income, for example salaries or wages, income received from investments and maintenance.
These goals will help you manage your finances and at the same time ensure that you have enough for all your expenses. Ensure that you know how much you want to save or contribute each month.
Look at your budget from last year and ascertain what you need to save for. Factor in the emergency savings fund. If you haven’t dipped into your savings fund, let it stand and continue adding to it.
“An emergency savings fund is not a vehicle for your luxury purchases. Grow and maintain your savings fund – will definitely help you in the future,” concludes Ochse.
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