No matter where you seek financial advice, the first step is almost always to set up an emergency fund or savings account. While this is sound advice, the challenge lies in figuring out how to put it into practice. Questions quickly arise: How much should you save? Where should you keep it? And what’s the best way to ensure it’s both accessible and growing over time?
We spoke to personal finance guru Carla Venter, better known as the expert behind Money With Carla, and Adrian Hope-Bailie, CEO at Fynbos Money, to help us unpack the details.
Why is it important to build up an emergency fund?
“Everyone has unexpected incidents happen to them,” says Carla. “Be it your garage door that stops working, or your kids that lose their new school shoes. Or worse, a car accident or even losing a job. Having an emergency fund saved up prevents you from going into debt or being forced to sell your investments when something unexpectedly goes wrong.”
Adrian says that knowing you are able to survive a few months without an income is very liberating. ”It opens up a lot of life choices that would otherwise be off the table like making a big career change. You shouldn’t be using your emergency fund for splurging on a holiday but having some financial freedom means you are ready when opportunity comes knocking.”
How much do you need?
According to Carla, there are no “hard rules”. Her guidance is between 3-6 months’ living costs but more if you’re self-employed. She offers the following guidance:
- If you’re in a stable job and could easily find another job, you don’t own a house and don’t have significant financial family responsibility, you could look at saving up to 3 months’ living costs in your emergency fund.
- If you’re the sole breadwinner, own a property (which means unexpected repair costs sometimes), a car, pets – this means more financial responsibility and building up a bigger emergency fund. Up to 6 months’ living expenses.
- If you’re a business owner or you’re self-employed and your cashflows are more uncertain or cyclical – then it could be smart to hold up to 12 months of living costs in an emergency fund.
Fynbos Money has a calculator that helps users set their emergency savings goal based on this same calculation. “The first thing our users are prompted to do when they start with Fynbos Money is set their emergency savings goal. We help them figure this out based on their monthly expenses and how many months they want to have cover for.”
Why do we need it?
“Your emergency fund is like insurance for your personal wealth” says Adrian. “Wealth generation requires sticking to a good long term financial plan. Your emergency fund is the cash you can use, when you need it at short notice, without disrupting that plan.”
According to Carla, most people don’t have any emergency funds saved up. They end up using their credit cards or personal loans to cover costs if something goes wrong, like their car breaking down. “This often sets them back financially, as high-interest debt can take months to repay – costing them even more in interest along the way. As a result, they’re unable to redirect that money toward investments, delaying their financial growth!”
Don’t fall into the savings account “safe trap”
Carla talks to many women in her day-to-day work who are afraid of investing in the stock market. They see it as gambling or believe it’s only reserved for very smart or wealthy people.
“The fact is, if you want to build wealth and make your money grow in the long term – you need to invest it and not hold it in a savings account.”
“This is where having an emergency fund empowers you. Once you have built up sufficient emergency funds, you need to start investing. Don’t hold too much money in a savings account. Savings accounts are for short term goals and emergency needs. But too much will prevent you from getting maximum long term growth (which has historically been in the stock market). An emergency fund is the first step to enable you to start investing.”
READ MORE: Finance Queen Carla Venter Says *This* Is How To Budget In 2025
But can’t you use your investments in an emergency?
Only as a last resort. As Carla says, “Money invested is still your money. But you don’t want to access your investments in an emergency because you want to leave them to grow for the long term. Stock markets are volatile but give the highest long term growth historically. If the market goes down, you don’t want to withdraw your money and not give it a chance to go back up again. Investing is a long-term commitment to make compounding and time work for you.”
“Consider what happened during COVID,” says Adrian, “when a lot of people lost their income right when the stock markets also crashed. Anyone that had no emergency fund was forced to sell their investments at the worst possible time.”
How do you set up an emergency fund?
1. Don’t use your existing bank account
Carla suggests that you avoid simply using your existing bank account: “You need to keep it in a separate account and get the highest interest rate on it possible. That will ensure you maximise the growth but also means you’re not tempted to use it for non-emergencies.”
2. Make sure you can access your emergency fund quickly
“Make sure that wherever you hold your emergency funds, they’re accessible quickly. An emergency fund is no good if you can’t access the funds in an emergency. For example, savings accounts with fixed deposit terms are no good” says Adrian. “A more sophisticated option, if you own a property and have a mortgage bond, is to have an access bond and overpay into your bond as a way of saving. You benefit from reduced interest payments on your bond but you need to make absolutely sure you can access the money. Some banks blocked access to those funds during the COVID crisis so if you take this approach make sure you read the fineprint on your access bond agreement.”
3. Take advantage of Fynbos’ emergency savings feature
“Obviously, my recommendation is to use Fynbos, and specifically take advantage of our emergency savings feature. It’s not a generic savings account, it was designed for this exact use case. Your funds are invested in a high-yielding money market fund at Allan Gray and are accessible whenever you need them.”
Carla is also a fan of Fynbos Money’s emergency savings feature: “They’ve taken the complexity out of planning your emergency fund – now you can track how much you still need to add to your emergency fund but you can also easily transition into the next step; to start investing. Your best place to start investing is in your Tax-Free Savings Account – where it’s protected from tax. This is an amazing way to invest because you can invest it all in foreign equities (which in the long term experts expect to give the highest returns). And Fynbos allows you to seamlessly go from emergency fund to TFSA – winning! No more complexity, jargon and bad customer service. It’s amazing that you can now do it yourself, and you can automate it! Everyone wants a life with less admin 🙂”
READ MORE: 5 Good Money Habits That Your Kids Can Learn From
A quick note on TFSAs from Carla
“It’s amazing that South Africans have a way of saving for retirement that’s tax-free. This is a no-brainer investment in my opinion. But please don’t make the top 2 mistakes I see everyone make:
- Pay too high fees to an adviser: with fees of more than 1% your money is not going to get the maximum compounding growth.
- Holding it in an interest-bearing account only. You need to invest it, many don’t know it’s possible but your TFSA can be invested in the stock market and this is where the growth is at!
- Bonus tip: Fynbos helps you skip the advisor fees and helps you invest it in foreign equities”
Carla’s top 3 tips for building up an emergency fund
- Get a high interest rate but without the volatility of the stock market. Make this money grow for you. Don’t just hold it in cash.
- Use a separate account so you’re not tempted to use it for a shopping spree.
- Don’t hold too much, set your goal, and once reached – start using your TFSA to invest.
About the authors
Carla Venter is a personal finance guru known for her educational content on YouTube and Instagram. She is a qualified Chartered Accountant with an MBA and strongly advocates for setting up an emergency fund as a first priority.
Adrian Hope-Bailie is the CEO at Fynbos Money, an investment platform that makes it easy to get started on your investment journey and set up your emergency fund and tax-free investments.
This article is not financial advice, it is provided for educational reasons.
**WH Partnership
