Do you have an emergency fund? Do you have money set aside incase something happens?
As much as we have M-PESA at our disposal, it’s not enough to be comfortable thinking that once you get in a fix, your friends or family will come through for you with mobile money. This works, sometimes, but it’s not enough.
Saving for an emergency fund can sound like something impossible and you may even think you don’t even need one. But imagine if you had a serious emergency right now. How much is in your bank account and will you be able to survive after the emergency?
So what’s an emergency fund?
This is essentially an account that has enough money that can be used for emergencies like medical emergencies, accidents or even cash for when you’re stuck in a situation with the police, in court or in a robbery/carjacking. It may even be something small, like replacing a hard drive for work.
What are the factors you should consider when setting up this fund?
How quickly can you access this money? The whole point of this fund is the fact that you can access this money immediately. This includes the middle of the night & the middle of nowhere. It’s wise to choose a banking institution that has facilities, including ATMs that are located in almost every part of the country.
It’s also wise to have money saved in your phone, like in your Mshwari Lock Savings Account. The Lock Savings Account is really great for such a purpose. The only downside is for you to access your money, you need to request a withdrawal which can only be processed after 2 days so in cases of sudden emergency, this wouldn’t be your best bet.
Decide how much you should save.
This is the tricky part. With so many bills and responsibilities to take care of, keeping money aside may be difficult for most, especially if you don’t have a steady paycheck. Nonetheless, it’s wise to have at least one month worth of your net salary saved in your emergency fund. For business owners/freelancers, think of it as the amount of money you would make in a month – without the hassle of chasing after invoices – and have that saved up.
Once it becomes easier to save, you can increase this amount.
Note that there really isn’t a specific amount you should have, but take a look at your life, family, business/career and think of the things that could unfortunately go wrong and start saving up for an amount that’s sustainable to you.
The goal isn’t to squeeze your pockets or make you go bankrupt, it simply allows you to ward off financial catastrophe without draining other accounts, interrupting progress on other financial goals or forcing you into debt and a way of keeping you in preparation for the uncertainties that life brings.