May 2026 Finance Newsletter: Emergency Savings

BE PREPARED FOR THE UNEXPECTED

WHY AN EMERGENCY SAVINGS FUND IS A TOP PRIORITY FOR YOU.

Whether it’s a geyser that breaks right before you need to pay school fees, tires that burst right after an expensive car service or an unexpected hospital visit at the same time as a family funeral, financial emergencies will happen. It’s not a matter of if but when.

So if we know they will come when we least expect them, there is no excuse for being unprepared. We can blame unforeseen events for wrecking our plans, but we’d get further by blaming ourselves instead for not planning better.

HERE IS A TIP that can prepare for emergencies in advance - and avoid expensive emergency debt:

1. START AN EMERGENCY SAVINGS FUND

Everyone should have an emergency savings fund. As discussed above, emergencies will happen; it’s just a matter of when. Emergency savings allow you to pay for these emergencies, when they happen, without having to turn to debt. And until the emergencies do happen, you may even earn some interest on your savings account.

2. HOW MUCH SHOULD YOU SAVE?

Start with whatever you can afford, but aim for 10% of your monthly net income, then 10% of your monthly gross income. Ultimately, you should aim to have 3 months’ salary stored away in savings. If that seems impossible for now, anything you can save is a good start.

You can also customise your savings to your needs by splitting your savings into categories that speak to your life, like Medical, Family, Travel, Holiday, Shopping Spree, Accidental Breakage, Speeding Tickets etc.

3. WHERE SHOULD YOU SAVE?

Emergency savings are not long-term investments, but savings to help you manage your cash flow. You want to make sure that the money you invest is immediately available, so avoid any savings account with a withdrawal waiting period (e.g 32-day accounts).

If you are also saving for longer-term goals like travel, further studies or starting a business, savings vehicles with delayed withdrawal periods may be very effective in firstly keeping the money separate from your emergency funds, secondly removing the temptation to access it on a whim and thirdly to attract higher interest rates over longer periods.

For your emergency savings account, ask your bank about all their interest-bearing money market-saving accounts. Try to choose an account with a high-interest rate but, most importantly, select an account with low (or no) fees. Alternatively, you could consider participating in a good local stokvel.