VITAL TO SAVE FOR A RAINY DAY

IF THE pandemic has taught us anything, it is the importance of having emergency savings – especially if you own your own home.

Putting money into a contingency fund each month will provide homeowners with a financial cushion to avert disaster, says Adrian Goslett, chief executive of Re/Max of Southern Africa,

Something could happen to the house itself, such as a leaking roof or rising damp, or it could be a financial emergency that affects you as the homeowner, such as job loss or a cut in salary.

“The question you need to ask yourself is, ‘If something like this happens, would I still be in a position to afford the home?’”

Goslett describes three basic steps required for homeowners create a contingency fund:

Set incremental savings goals:

As a bare minimum, you should aim to save approximately one month’s salary although, in an ideal world, three to six months’ saved income is preferable. A six-month financial cushion should see you through most crises.

Select a vehicle:

When setting up a long-term savings vehicle, it is important to select an interest-bearing account that is separate from your regular banking, so that you are not tempted to dip into it for non-emergencies.

Automate the savings:

Avoid creating the option of not contributing towards your savings fund by setting up a debit order or automatic payment each month.

It is important to have an emergency savings fund to see you through crises. PICTURE: STEVE BUISSINNE/PIXABAY