Unexpected expenses are a fact of life, yet many South Africans remain financially Melusivulnerable when emergencies arise. Whether it’s an unplanned medical bill, car repair, job loss, or urgent home maintenance issue, these costs often crop up when budgets are already stretched.
Without a financial buffer, people often rely on credit, which can lead to a cycle of debt.
JustMoney’s inaugural Money & Me survey shows that only 9% of South Africans manage to save the recommended 10% of their income. An alarming 42% need to borrow money by month-end to get by. This pattern highlights how easily households become trapped in a cycle of borrowing, rather than saving.
Family responsibilities are another obstacle. Individuals supporting four or more family members have only a 6% chance of saving 10% or more of their income each month.
Despite these saving challenges, building an emergency fund remains one of the most important steps towards financial freedom, says head of customer experience at JustMoney, Sarah Nicholson.
“As South Africans celebrate Freedom Day on 27 April, it’s worth remembering that true freedom isn’t just about rights and independence – it’s also about financial security.
“Emergency savings can mean the difference between a temporary setback and a long-term financial crisis.”
Encouragingly, small, consistent actions can build a savings cushion, enabling households to absorb unexpected expenses without turning to borrowing.
Nicholson offers the following tips to build an emergency fund:
· Start small. Saving a small amount each month is better than putting it off until your finances are under control. Regularly set aside R50 or R100 to build the savings habit and increase this amount as your finances allow.
· Treat savings as non-negotiable. Just as rent, transport, and electricity must be paid, savings should be viewed as a monthly commitment. Set up an automatic transfer to a savings account on payday.
· Make the most of unexpected income. Divert tax refunds, overtime pay, bonuses, and other windfalls into your emergency fund.
· Cut recurring costs that add minimal value. Review spending on rarely used gym subscriptions, frequent takeaways, and impulse purchases.
· Set a realistic savings goal. Financial experts recommend having enough money to cover three to six months’ worth of expenses, but this may feel overwhelming. An initial target could be R1,000 or enough to cover one month of essential needs.
· Don’t dip into the fund. Reserve your emergency fund for unexpected costs such as medical bills, urgent repairs, or temporary loss of income.
“The ideal emergency fund should be separate from daily spending money, liquid enough to cover urgent expenses, and protected from market volatility,” says Nicholson. Consider the following options:
· High-interest savings accounts. Check whether the account requires a minimum balance, attracts fees, or imposes withdrawal limits, and offers a competitive interest rate.
· Call or notice accounts. These accounts typically require advance notice (e.g. seven days) before withdrawals, and generally offer higher interest rates than standard savings accounts.
· Money market accounts. Offered by banks and some investment platforms, these accounts invest in low-risk, short-term instruments and usually provide higher interest rates than savings accounts.
· “Pots” or “wallets”. Many fintech apps and digital banking platforms allow separate sub-accounts for specific purposes. Keep in mind that you only earn interest on these sub-accounts if the underlying account pays interest.
When choosing where to hold your emergency savings, prioritise products that balance easy access with competitive returns.
“An emergency safety net is more attainable than you might think,” says Nicholson. “Start today, and every amount you save will bring you closer to true financial independence.”
JustMoney is a South African financial services company providing a range of solutions – from loans to insurance – underpinned by the data and coaching individuals need to make good money choices.
JustMoney believes that money is personal, so its support is too. Customers are more than just a number; they are individuals with unique goals and dreams. From securing a loan or protecting what matters, to finally getting a handle on debt, JustMoney provides a personalised experience powered by insights that fit customers’ lives.