Many financial advisors encourage you to save up to 3-12 months of your salary equivalent but this differs from one person to another based on your income level, daily expenditure or expenses and financial planning method.
The COVID-19 pandemic will without a doubt change the way we look at certain things in our lives and one of those is the emergency fund. The battle of survival during this tough times will inform and motivate our financial decisions even after the crisis.
Tough times have called for tough measures to keep companies afloat through decrease in salaries and lay—offs. If we as a country or individuals want to be synonymous in financial success stories, then we must emulate or come up with better ways to secure our finances towards wealth creation.
You might have heard of Motivational Speaker Lisa Nichols, who made a decision to save for a better life eventually tell her rising story from rock bottom and committing to saving and how her life took a turn when she desperately needed it. That can be your story to write as well based on the vision you have for yourself.
An emergency fund is part of your money that you commit to paying monthly or whichever frequency suits you to serve you in the event of an unprecedented crisis. Many financial advisors encourage you to save up to 3-12 months of your salary equivalent but this differs from one person to another based on your income level, daily expenditure or expenses and financial planning method. It is to be noted that an emergency fund is not your regular savings initiative.
Your emergency fund is to be beneficial long-term in extremity but your regular savings initiative could boost your new business venture, necessary vehicle repairs and probably your new home. An emergency fund will help you in the event of a job transition, job loss or extra cost that your insurance premium might not cover.
You may be wondering when you should start an emergency fund, the answer is Now. Now is the right time to live below your means and save as much as you can and while you can. You can set up an account with your bank which does not necessarily need you to have a debit or credit card. If you happen to be the breadwinner of your family or have dependants then, this will be an excellent plan for you in the tough times.
The FinAccess household survey 2019 in partnership with the Central Bank of Kenya and the Kenya National Bureau of Statistics indicates that Kenya’s borrowing rate has maintained an upward trend since 2013. The borrowing culture in the advent of digital lending platforms is likely to decrease our saving habits leaving us even more exposed to financial crisis without the emergency fund.
We definitely may be down at the moment but not out! One way to look at the Covid-19 pandemic is to appreciate what we are learning, unlearning and relearning about finances. The emergency fund is not a foreign concept, it applies to all and the best advice you can take away, is to start now.
So what are you waiting for?