Open an emergency savings account and be virtually recession-proof

Keep things up and running during financial crisis

10:36 09 November 2014

Time and time again, people are advised to open a savings account to cater for emergencies. An emergency account provides financial stability during rough times and it is a part and parcel for people looking to invest their way to prosperity and financial freedom. Despite all the continuous communication that urges people to set aside a coffer for emergencies, many are yet to take up the idea.

 

It is understandably difficult to put money aside for an indefinite period while there are so many current needs that have to be attended to. Many people would prefer to pay for a new car, or pay a visit to Seychelles or perform a kitchen upgrade, all the while thinking that there is no chance they will need to draw money from an emergency account.

 

In truth, however, chances are very high that they will need to cater for occurrences they did not expect, which is the nature of emergencies; unexpected, but not necessarily uncommon. Since they did not have an emergency fund, when the unexpected happens, they are thrown into disarray, sorrowing and borrowing. Having an emergency savings account would save them from the need to charge up their credit cards and they will not be forced to go sorrowing and borrowing from friends and family.

 

Financial experts recommend that individuals and households should create emergency accounts to the size that can sustain them for up to nine months of their normal expenditures. When emergencies such as ill health and loss of job knocks, your household will be able to draw money from the savings account and pay mortgage and other utility bills. Emergency accounts offer a much needed cushion during financial difficulties by providing a short term income to sustain the family as you weigh available options to stabilise your financial situation.