Building an emergency fund – how to do it and why.

Are you prepared for the unexpected? Having an emergency fund is a good place to start if you’re looking to help build a sense of financial security. Setting up an account with a buffer can help you remain on top of your expenses or avoid debt if an unexpected expense does come up.

How much do I need to save?

The amount of an emergency fund may vary from person to person and can depend on many factors such as:

  • your current expenses
  • if you’ve got a kurī, tamariki or other whānau to support
  • if you’re likely to incur any costs in the future – think dentist appointments, potential car or house repairs etc

Here are some top tips from ASB on how to start your emergency fund:

CALCULATE HOW MUCH YOU’LL NEED TO SAVE – Start by planning to save extra for things like your car registration or car services – just in case there’s an unexpected repair you might need. While a $250 repair might not break the bank, it can throw your budget out if you aren’t prepared. Then look at what you tend to spend in a month. If you were unable to work for a period of time, how much money would you need to have saved to cover those expenses?

SET UP YOUR ACCOUNT AND MAKE A PLAN – Work out how much to put aside, either weekly, fortnightly or monthly. Saving for three months of living costs can be a lot, so start small. Saving $10 a week is still over $500 a year. If you’re not sure where to start, your first goal can be to save around $500 – $1,000. And then work towards three months’ living expenses.

Tip: your emergency savings should be kept separate from your regular everyday account so you don’t spend it on everyday items.

START PUTTING MONEY ASIDE AUTOMATICALLY – Once you’ve set up your budget and your goals, it’s a good idea to make saving automatic. Set up an automatic payment so that you don’t even have to think about it, and you’re less tempted to start spending it.

IF YOU NEED TO PUSH GO – If you need to dip into your emergency savings, that’s okay, that’s what it’s there for. All you have to do is make a plan to top it back up again.

Read more about planning for the unexpected and calculate how much you might need here


Make it happen:

Our friends at Live Sorted NZ have a checklist you can use to track your progress! All you need to do is create an account with Live Sorted NZ and add a task or goal to your checklist.

You can regularly update this with your progress to stay motivated and keep on track.

Find more information here

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