Emergency savings: Here's how much you need and when to use it...
When debts are looming over you, it can be tempting to use your savings to pay them.
Relebogile Mabotja speaks with J Van Wyk, Executive Financial Adviser and Registered Financial Planner
Listen to the interview in the audio below.
Having an emergency savings fund is an important part of your financial stability.
Van Wyk recommends having six to eight months’ worth of expenses in an emergency savings pocket.
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If you have that much money accessible to you, it can be tempting to use it to pay off any debts.
As tempting as it may be, Van Wyk says that you should not dip into your emergency funds unless it is a desperate situation.
He says this should specifically be for out of the ordinary expenses such as unexpected medical expenses or in case you lose your job.
He adds that you need this emergency fund so you do not get caught by a high-interest-short-term loan in an emergency.
“Don’t get into debt for an emergency event… once you are in this whirlpool, you will never get out of it.”
- J Van Wyk, Executive Financial Adviser and Registered Financial Planner
Van Wyk says that the two pot retirement savings should also be treated as an emergency fund and should only be used in life-or-death situations.
In his experience, when people do use emergency savings to pay off debt, they end up worse off a few months later with nothing to fall back on.
Scroll up to the audio player to listen to the interview.