What is an emergency fund?
An emergency fund is an investment or bank account containing money to be used only in the event of an emergency, such as losing your job, having to make an unexpected car repair or any other unexpected expense.
During the COVID pandemic many people realised that it made an enormous difference for them or that it could have made a huge difference.
How much money should you keep in your emergency fund?
At PWG we advise clients to keep between three- and six months’ worth of living expenses in an emergency account. If your living expenses are R20 000 per month the required emergency fund will need to be between R60 000 and R120 000.This may sound dauting, but even modest monthly amounts will compound over time.
We have various solutions which are suitable for this purpose. The main consideration is that the investment should be liquid (accessible quickly in the event of an emergency).
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Author: Anton Schutte: Talent and Recruitment Manager and Certified Financial Planner®: PWG Group