How Much Emergency Money Should I Have?

Car trouble, a hospital visit, a family funeral or a sudden retrenchment. When emergencies hit and there is no money set aside, the only option often seems to be a loan. Having even a small emergency fund changes that, and it can give you real peace of mind.

What is happening

An emergency fund is money you keep aside only for real surprises: things that are urgent, necessary and unexpected. It is not for holidays, Christmas or a new phone.

The usual guide is three to six months of essential expenses. Essentials are rent or bond, food, transport, electricity, school fees, minimum debt repayments and insurance. If you work on contract, earn commission or are the only earner at home, aim nearer six months. If you have a stable job and a partner who also earns, three months may be enough.

That can sound impossible, so start smaller. A first goal of R1 000, then one month of essentials, already protects you from many common shocks. UIF can help if you lose your job, but it pays only part of your salary and payments can take time to start.

Keep the money somewhere safe and easy to reach within a few days, but not so easy that you spend it by accident. A separate savings pocket, a money market account or a short notice deposit are common options. Avoid locking it into investments that can drop in value.

Signs to notice

• You use credit cards or loans for car repairs or medical bills.
• A single unexpected cost would mean missing rent or a debt payment.
• Your 'savings' are also your spending money.
• You would not cope for a month if your income stopped.
• You worry often about what would happen if something went wrong.

30-second self-check

Answer yes or no.

• Do you have less than R1 000 set aside for emergencies?
• Would a R5 000 surprise cost push you into debt?
• Is your emergency money kept in the same account you spend from?
• Have you borrowed for an emergency in the last year?
• Would you struggle to cover one month of essentials if your income stopped?
• Are you the main or only earner in your household?

0-1 yes: You have some protection. Keep building towards three to six months of essentials.
2-3 yes: You are exposed to common shocks. Start a separate emergency savings pocket this week, even with a small amount.
4 or more yes: Any surprise cost right now would likely become debt. Starting small matters more than the amount. Consider also getting help with your budget or debt.

What you can do next

• Today: Open a separate savings pocket or account and name it 'Emergency only'.
• This week: Set up a debit order for the day after payday, even if it is R100 or R200.
• This month: Work out your essential monthly costs and set a first target of one month. Put any bonus, tax refund or once-off income straight into it.
• When you use the fund, pause other savings and rebuild it first.

Your tool

Emergency Fund Calculator - enter your essential monthly costs and what you can save, to see your target, your first milestone and how many months it will take to get there.

When to get professional help

If you cannot save anything because debt repayments take all your income, speak to a money coach or NCR-registered debt counsellor. Living without any buffer is stressful and can affect sleep and mood, which your EAP counsellor can help with.
Who can help: Money coach, FSCA-authorised financial planner, NCR-registered debt counsellor

Getting help in South Africa

Banks offer savings pockets, notice deposits and money market accounts; compare fees and interest. If you lose your job, the Department of Employment and Labour (labour.gov.za) explains how to claim UIF. Your Cleared Mind EAP can connect you with a money coach to plan how to build your emergency fund.