Saved by the savings: The importance of emergency funds

by | Jan 23, 2023

With more than 75% of the country’s employed adult population earning less than R5 800 per month, there’s only so much income people can dedicate to any kind of saving initiative. We see this especially when it comes to retirement. According to a BusinessTech survey in January 2022, more than a third (35%) of middle-class South Africa are not contributing any of their salaries to retirement savings.

But the lack of saving also rears its ugly head when people are faced with accidents or unforeseen events or expenses that result in them struggling to make payments. Whether it’s car repairs, pet healthcare, or a sudden loss of employment, South Africans need to look into establishing an emergency or “rainy day” fund.

“With interest rates as high as they are, it’s not always wise to resort to personal loans or credit cards to pay for large, one-off expenses or compensate for a sudden loss of income. An emergency fund, whatever form it takes, gives people a landing pad and reprieve so that their financial health is not compromised in the near and far future,” says Motlatsi Mkalala, Head: Main Market at Standard Bank South Africa.

Here’s what you need to know about emergency funds and how you can financially prepare yourself for emergency expenses.


Making contributions


Ideally, an emergency fund should have enough capital to cover between one and three months’ worth of expenses. Provided there are other financial plans such as medical aid and home insurance in place to protect you, that should result in an adequate amount that covers monthly expenses and any debt obligations you may have.

Emergency funds also benefit from you having a savings plan. By determining how much you can put in per month, you can establish reasonable expectations and goals.

A good way to start saving is to put any additional cash you already have or will have into it. By prioritising essential items such as groceries and transportation, and not spending it on one-off luxury ones, you can begin to make monthly contributions. Also, consider putting any cash you receive from an income tax refund into your fund. Refunds can range from small to big amounts and they can be useful to initially kickstart your savings.

Another option is to supplement your existing income with a second or part-time job. Digital transformation has opened up new streams of revenue such as content creation, online teaching and remote teleworking.

“South Africans face incredible economic challenges and many are simply not able to dedicate a portion of their existing income to a saving initiative,” Mkalala explained. “Because of that, it’s important to think outside the box, to consider new opportunities and expand our capabilities of accumulating for ourselves and the generations that follow us. Along with access to the right tools and resources, we can this a reality for everyone.”


Choosing the right account


There are various tools available to South Africans to help them bolster their savings for the short term. In addition to having an account that offers liquidity (easy and quick access to funds), people should also consider banking solutions that help grow their savings and promote a culture of good financial behaviour.

Standard Bank’s Fixed Deposit investment account offers an innovative and reliable way to save capital and invest at the same time. With an opening deposit of just R1 000 and no monthly admin fees, account holders can choose their investment period, sit back and watch their money grow with a fixed interest rate of up to 9.5%. Regardless of the investment period, ranging from one month up to five years, holders can then transfer amounts to any other account of their choosing while also linking their Standard Bank card for in-app, online and ATM access.

“The benefits of starting to put money into an emergency fund during this period is that it helps you to develop a habit. In time, you may find that you have become used to making provision for these contributions in your budget. You can then continue to do this, and if you don’t end up having to dip into the funds, they will build up nicely and could then be rechanneled to top up a longer-term investment housed in a Tax-Free Savings Account or Retirement Annuity,” concludes Mkalala.

For more information on the Standard Bank Fixed Deposit investment account and other ways you can save and start an emergency fund, visit

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