Leonie O’ Connell, a financial advisor at Momentum

Life is full of surprises, both good and bad. As parents, the joy of raising a child is often coupled with a heightened sense of responsibility.

According to Leonie O’ Connell, a Momentum financial adviser, providing for your family goes beyond the immediate needs of food, clothing, and shelter; it extends to safeguarding their future against unforeseen circumstances. One of the most vital steps you can take to secure your family’s future is by building an emergency savings fund.

“Before diving into the specifics of an emergency fund, it’s important to clarify your financial goals. Are you aiming to buy a home, a new car, or pay off existing debt? Setting clear financial objectives is the first step towards achieving them. However, irrespective of these goals, having an emergency fund should be at the top of your list,” she says.

An emergency fund acts as a financial cushion, providing you with peace of mind that you can handle unexpected expenses or sudden loss of income. Unfortunately, many households are not prepared. According to the Financial Sector Conduct Authority (FSCA)’s Financial Literacy Baseline Survey, only 26% of respondents have set aside funds that would cover three months’ expenses in case of an emergency, while a staggering 71% have no emergency fund at all.

O’ Connell says this lack of preparation can have severe consequences. The Momentum Unisa South African Household Wealth Index Q4 2023 highlights that households which do not save or invest are missing out on significant wealth accumulation opportunities. Conversely, those who actively save in pension funds, retirement annuities, long term insurance products, and investments such as unit trusts and shares accumulate more wealth over time.

Speaking to how much your emergency fund should be, O’ Connell says your emergency savings fund should be able to cover your expenses for 3-6 months. “This fund should be kept separate from your other savings accounts, ideally in a savings account that allows you immediate access when needed,” she explains. “This separation ensures that your emergency fund remains untouched until a genuine emergency arises.”

“We never know what awaits us around the corner. Illness, job loss, or unexpected expenses can disrupt our lives without warning” she explains. “Being financially prepared is one of the most important gifts you can give to your family. By building an emergency fund, you provide a safety net that protects your loved ones and ensures that you can navigate life’s uncertainties with confidence.”

“An emergency fund is not just a financial necessity; it’s a commitment to your family’s well-being and future security. Don’t hesitate to reach out to your financial adviser for personalised guidance and strategies. With their expertise, you can ensure that your financial plans are robust and well-aligned with your family’s needs, ensuring your journey to success,” O’ Connell concludes.

ENDS