“I owe myself money; it’s not even funny.”
This was a text I sent to a friend a few days ago. I was frustrated.
In the next few days, I sat down to look at my finances. At first, the numbers were not numbering (rolls eyes).
Where had the money I owe myself gone and why? I asked myself.
And then it hit me; just the other day, I transferred 50% more money into my emergency fund. I have not saved up enough. It’s a drop in the ocean, I must say, because I’m nowhere near covering a month’s salary.
Financial experts say you need between three to six months’ salary in your emergency fund, which will serve as a safety net in the future.
Life happens, and no one gets a warning to expect an emergency.
“Unexpected expenses are a fact of life, yet many South Africans remain financially vulnerable when emergencies arise. Whether it’s an unplanned medical bill, car repair, job loss, or urgent home maintenance issue, these costs often crop up when budgets are already stretched,“ says financial services company JustMoney head of customer experience, Sarah Nicholson.
“Without a financial buffer, people often rely on credit, which can lead to a cycle of debt. JustMoney’s inaugural Money & Me survey shows that only 9% of South Africans manage to save the recommended 10% of their income.
“An alarming 42% need to borrow money by month-end to get by. This pattern highlights how easily households become trapped in a cycle of borrowing, rather than saving. Family responsibilities are another obstacle. Individuals supporting four or more family members have only a 6% chance of saving 10% or more of their income each month.”
Nicholson says despite these saving challenges we face from month to month, “building an emergency fund remains one of the most important steps towards financial freedom”.
“South Africans celebrated Freedom Day on 27 April. It’s worth remembering that true freedom isn’t just about rights and independence – it’s also about financial security.
“Emergency savings can mean the difference between a temporary setback and a long-term financial crisis. Encouragingly, small, consistent actions can build a savings cushion, enabling households to absorb unexpected expenses without turning to borrowing.”
All my cents are accounted for, and building an emergency fund is a priority for me. However, I might just owe myself a lot of money to cover six months’ salary.
The work has started to fill that account.
Nicholson shares tips on how to build an emergency fund
Start small: Saving a small amount each month is better than putting it off until your finances are under control. Regularly set aside R50 or R100 to build the savings habit and increase this amount as your finances allow.
Treat savings as non-negotiable: Just as rent, transport, and electricity must be paid, savings should be viewed as a monthly commitment. Set up an automatic transfer to a savings account on payday.
Make the most of unexpected income: Divert tax refunds, overtime pay, bonuses, and other windfalls into your emergency fund.
Cut recurring costs that add minimal value: Review spending on rarely used gym subscriptions, frequent takeaways, and impulse purchases.
Set a realistic savings goal: Financial experts recommend having enough money to cover three to six months’ worth of expenses, but this may feel overwhelming. An initial target could be R1,000 or enough to cover one month of essential needs.
Don’t dip into the fund: Reserve your emergency fund for unexpected costs such as medical bills, urgent repairs, or temporary loss of income. “The ideal emergency fund should be separate from daily spending money, liquid enough to cover urgent expenses, and protected from market volatility,” says Nicholson.
So, what options should we consider?
High-interest savings accounts: Check whether the account requires a minimum balance, attracts fees, or imposes withdrawal limits, and offers a competitive interest rate.
Call or notice accounts: These accounts typically require advance notice (e.g. seven days) before withdrawals, and generally offer higher interest rates than standard savings accounts.
Money market accounts: Offered by banks and some investment platforms, these accounts invest in low-risk, short-term instruments and usually provide higher interest rates than savings accounts.
Pots or wallets: Many fintech apps and digital banking platforms allow separate sub-accounts for specific purposes. Keep in mind that you only earn interest on these sub-accounts if the underlying account pays interest.
When choosing where to hold your emergency savings, prioritise products that balance easy access with competitive returns.
“An emergency safety net is more attainable than you might think. Start today, and every amount you save will bring you closer to true financial independence,” says Nicholson.
Sowetan
