Failing to plan is planning to fail. When it comes to your personal finances, there’s not a more dependable truism. It’s only when you’re faced with an unexpected emergency, and you have no money to pay for it, that you realise how valuable a little preparation would have been. Instead of leaving yourself vulnerable to unexpected expenses, rather plan and prepare for rainy days by creating an emergency savings fund.

Why is an emergency fund important?

When you find yourself in a position where you need to pay for something unexpected like a burst geyser or a doctor’s bill, it’s easy to turn to personal loans and credit cards. But such solutions only create a cycle of debt-dependency. An emergency savings fund, on the other hand, can earn you interest until you need it.

Building an emergency fund starts with budgeting

The truth is that you should start saving immediately and with whatever funds you have available. Working out a monthly budget will help you identify money that’s available to put aside for saving. You can the Vault22 app. The app tracks your spending and automatically generates a personalised budget to help you manage your money better every month. Remember, even R50 is better than nothing, and once you’ve begun, it’s easier to keep it up and focus on putting aside that little extra every month. If you think you may struggle to stick to your savings commitment, arrange a debit order. This way, your savings will be deducted along with all your other debit orders, and you won’t have to worry about remembering to make a deposit each month.

What kind of account should I use for an emergency fund?

Starting an emergency fund is simple. Most banks offer savings options alongside current accounts. These can be savings pockets attached to a regular transactional account or a standalone savings account. What’s important is that the interest or rate of return offered by your chosen account at least matches inflation to ensure that your savings hold their value.

You must be able to access your money instantly.

When things go wrong, you need to be able to access your savings in a hurry. Check how quickly you can access your funds without paying early withdrawal penalties. The ideal account for an emergency fund gives you instant access to your savings at no additional cost.