Save Emergency Fund in what?

This topic contains 4 replies, has 3 voices, and was last updated by 2 years, 2 months ago.

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  • #7053


    Hi Maya

    I started putting R500/m away for an emergency fund in Allan Gray money market account. Then I got annoyed by how little I was earning on it, so changed it to a Coronation fund (in the AG platform). However I now see this as an investment, not an emergency fund – so would find it hard to tap for such a mundane occurrence as a household emergency!

    So, I was wondering what is the best way of stashing away an emergency fund that means that it is liquid enough to draw on yet still earns something. The last time I spoke to a bank about a savings account, the managers advice was ‘don’t do it, savs acc’s are too expensive…’.


  • #7056

    Emergency funds are not for growth so don’t set your expectations too high. The aim is for accessibility and capital preservation – as you never know when you will need it you don’t want to have to worry about market movements. A high interest bearing money market account is unfortunately your best bet – just make sure there are no fees. You could even opt for a fixed deposit as long as you know there will be a penalty if you do need to draw down. I also wouldn’t use up the valuable R30 000 you can put in a tax free savings account as this is better for long term savings. Think of it as insurance rather than an investment

  • #9711

    What works quite nicely is to put your emergency savings into you homeloan (assuming you have one and it is an access account). The advantages are:
    – It is immediately accessible
    – Risk Free
    – Good interest rate (you effectively getting prime since you will save on the interest while the funds are in the home loan)
    – Tax Free!

    • #9712

      I agree but you need to make sure you do not confuse the goal of paying off your mortgage with storing emergency funds.

  • #9713

    Yes, good point. You need to keep track of what part of the homeloan available balance is for emergency funds (I update a spreadsheet every time I deposit anything into the homeloan which is not for the purpose of paying it off early).

    Also important to only use what is available and not take out from the homeloan what you haven’t put in – discipline!

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