You are Here > Home > Financial Sense Home > How to start that emergency fund

How to start that emergency fund

Jul 2, 2020

How to start that emergency fund #NedbankSavingsGoalsIf you follow my articles, podcasts or videos, you will know that I talk a lot about emergency funds. The concept of an emergency fund was really drummed into me when I edited Dave Ramsey’s Total Money Makeover for South African readers. I always say that you cannot get out of debt until you have an emergency fund because it is that fund that stops you from going back into debt.

But the thing that has struck me the most is the peace of mind it provides. Think about it: when the Covid-19 crisis hit and our country went into lockdown, how would you have felt if you had three months of your expenses sitting in an emergency fund?

But even in normal times, you may have an unexpected medical procedure and must fork out a co-payment or have a bumper bashing that requires paying a R5 000 excess. Just knowing you have that money put aside will make you sleep a lot better at night.

In my case, I was so motivated by Total Money Makeover that I used my editing fee to boost my emergency fund. Although it did take a while, I eventually built up my full emergency fund, so when lockdown happened, I knew I could survive three to four months of no income. That made life as a freelancer a whole lot more comfortable!

Build your emergency fund before paying debt

This may sound counter-intuitive, but having at least R15 000 – R20 000 in an emergency fund should be a bigger priority than paying off your debt right now. Only once you have that R15 000 safety net in place should you focus on paying off those debts. Once you have that as a starting point, allocate some of your tax rebates, bonuses, or extra cash from a side hustle to build it up until you have at least three months of your expenses covered.

And remember, if you ever need to dip into your emergency fund, make it a priority to top it back up before you spend or save anywhere else.

Where to stash that emergency cash

An emergency fund needs to be readily available, but it also needs to be one step away from your bank account, so you are not tempted to spend it. As this is money you will need unexpectedly, you should not use it to invest for the long term but it should be in an interest-bearing account that guarantees the capital.

Look at the options available at your bank, such as an investment account that pays a reasonable rate of interest and has no fees. An example would be a 32-day notice account.

While you are building up that emergency fund, also consider starting a separate contingency fund. This is different from an emergency fund as it is for planned future expenses – things that you know you will have to pay in the year ahead.

This could be a major car service, a family holiday or next year’s school fees. A contribution to a contingency fund should form part of your monthly spending budget and be funded each month as part of your living expenses.

You could use similar bank products for your contingency fund, but rather keep the two accounts separate, even if combining them gives you a slightly better interest rate. These are two different goals, with two different objectives and you don’t want to be using emergency funds to pay for school fees or holidays.


This post was sponsored by Nedbank.


  1. How is a 32 day account liquid?
    It takes 32 days to have liquid capital, an emergency (immediate access) without having to pay expenses to obtain capital is an emergency fund.
    Why don’t you educate people rather to use an Unit Trust(CIS investment) invested in an Money Market fund, liquidity within 4 to 7 hours rather than 32 days.

  2. I always thought its best to pay off your debt before building an emergency fund, now I must slowly start while honouring my debt obligations

    • Exactly, an emergency fund keeps you from going and accessing that credit

  3. Thank so much for fruitful information about saving money so that you can have emergence fund. I have lean at lot from this article, now I will manage to save.

      • Hi Maya

        Thank you for all the amazing advice. Your previous articles mentions R10000 as an emergency fund(2018). 2020 article mentions R15000-R20000 why the big increase?

        Kind regards

        • Great question. I have been talking about R10 000 starting amount since 2014 – so it was overdue an updated figure given inflation and cost of living. In light of COVID and generally greater economic risks it also felt prudent to raise the figure.


Submit a Comment

Your email address will not be published. Required fields are marked *

Maya Fisher-French author of Money Questions Answered

Previous Articles

Video: Five ways to trick yourself into saving

Behavioural scientists have found that we feel loss far more greatly than gain, which is why the idea of cutting back on our lifestyle makes us very unhappy. We feel the sacrifice immediately but only reap the benefits in the future. While it may be a tough ask to...

When debt review works

Going into debt review is like going on a diet: it’s difficult to stick to and the results won’t be immediate, but it can be life changing. While there are serious issues around the way some debt counsellors conduct themselves, for Grace Bekwa, debt review gave her...

Listen: Creating Generational Wealth

Generational wealth is passed down from one generation to the next. But ultimately it has different context for different people. Generational wealth doesn’t have to be the Oppenheimer’s legacy. It could be leaving your children enough money to buy a home, or the...

What should you expect from a financial adviser?

I have worked in the financial industry for over 25 years and there is very little I don’t know about investing and managing money, yet I use a financial adviser. About 15 years ago I realised that while I knew about investing and money, I needed to have the input of...

SARS issues audit requests upon ceasing tax residency

The experts at Tax Consulting SA warn of the dangers of simply assuming you no longer have tax residency status in South Africa. There is an alarming number of South African expatriates relying on the 'tick-box' approach to cease their tax residency, while some simply...

How tax works on your retirement fund

One of the most common complaints I receive from pensioners is that they pay tax on their retirement benefits. While one can sympathise with the plight of pensioners who often struggle to come out on their retirement income, one needs to understand the tax structure...

Don’t rush into debt review

While debt review can be a lifeline for an over-indebted consumer, it should not be entered into lightly. You need to be aware that once you enter debt review, you cannot apply for new credit, and you cannot exit debt review until all your debts are settled. There is...

It’s time to spring clean your finances

“When you don’t know where your money is, when you have no filing system for your important documents, when you dive into your pocketbook to pull out crumpled bills, when your car looks like a garbage can, when your closets are filled with junk and clutter you cannot...

Funeral policy fraud on the increase

When fraudsters access your personal information, they can use this information to take out a funeral policy in your name, and then claim benefits on the policy using a fake death certificate and other supporting documentation. “Finding out you are the victim of a...

SARS issues guidance on crypto assets

On 27 August 2021, SARS provided further guidance on the correct tax treatment of crypto assets and how this must be declared in people’s tax returns. SARS published a document on its website entitled Crypto Assets & Tax. The publication should perhaps best be...

Pin It on Pinterest

Share This