Page 25 - Waterfall City Issue 6 June 2024

A n emergency fund is a
Robyn Laubscher, Advice and Product Specialist
potential financial risks. The general
reserve of money set
recommendation is saving three to six
aside specifically to cover
months’ worth of living expenses in an
unexpected expenses or
financial emergencies. Just to be emergency fund.
clear, this is not for that holiday you Purpose
have always wanted to go on or that The primary purpose of an emergency
new golf driver that is on sale. These fund is to provide financial stability
funds serve as a financial safety net, and peace of mind during challenging
providing individuals and families times. Having an emergency fund
with a cushion to tap into when faced means that you won’t need to rely on
with unforeseen circumstances, such high-interest debt or liquidating long-
as a medical emergency, losing a job, term investments to cover unexpected
car repairs or other urgent needs. expenses.
KEY FEATURES OF AN Regular contributions
EMERGENCY FUND Rome wasn’t built in a day, and the
Some of the key factors to consider same applies to building an emergency
when building an emergency fund are fund – it doesn’t happen overnight.
outlined below. Contributing regular amounts over
time until the desired goal is reached is
Liquidity the easiest way to build an emergency
The nature of the fund dictates that fund.
the funds need to be easily and readily
available. Investing in a low-risk cash- Review
like fund could be greatly beneficial. Your emergency fund forms part
These types of funds generally have of your holistic financial plan and
low fees, offer reasonable growth for should therefore be monitored on a
the level of risk associated with them, regular basis, just like the rest of your
and are easy and quick to access. portfolio. As soon as funds are used for
an emergency, there should be a plan
Separate from regular in place to replenish your emergency
savings fund.
It is important to keep your emergency
fund separate from other investments. An emergency fund is a cornerstone
It is reserved for unexpected events. of holistic financial planning because
Don’t blur the lines between the it provides security, stability and
holiday you are saving for and your flexibility when faced with life’s
emergency fund – they should be two uncertainties, allowing individuals
separate investments, as they each to navigate challenges and pursue
have very different goals. their long-term financial goals with
confidence.
Size
The size of your emergency fund will Reach out to a financial adviser to help
vary depending on your individual you make holistic financial plans and
circumstances, such as monthly give you tools that can help you build
expenses, income stability and up your emergency fund.
“The general recommendation is saving
three to six months’ worth of living
expenses in an emergency fund.”
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