Did you say “God forbid” when you read emergency? I’m with you on that, fellow forbidding person.
Let us ask Merriam-Webster a few questions.
What is an Emergency?
an unforeseen combination of circumstances or the resulting state that calls for immediate action
What is a fund?
an amount of money that is used for a special purpose
What then is an Emergency Fund?
An Emergency Fund is an amount of money that is used for any unforeseen combination of circumstances or the resulting state that calls for immediate action.
2 + 2 = 4
Simply put, an emergency fund is money set aside in case of “incasity”. Incasities happen.
- Job loss.
- Business wahala.
- Major medical emergency (Not just the individual – A partner, child, parent).
- Loss of a partner, parent or benefactorWarning: Scripture Ahead
Why do you need an Emergency Fund?
- To cushion any fall.
- Ain’t about to be servanting to nobody! Pr.22:7 – The rich rule over the poor, and the borrower is servant to the lender.
- It is a good place to start building your wealth.
- My mama ain’t raise no fool – Proverbs 21: 20 – There is treasure to be desired and oil in the dwelling of the wise; but a foolish man spendeth it up.
- What you gon’ do when the oil runs out?
N.B – You are not building this emergency fund to put your trust in, your trust ultimately remains in God. This God gives seed to the sower and bread to the eater – I like to be both. I sow and I eat. It all comes from him. I also enjoy being a good steward of what I get.
Proverbs 6:8 – Prepares her food in the summer, And gathers her provision in the harvest.
Some people might quote Psalm 127:1 that says “Except the LORD build the house, they labour in vain that build it” – guess what? We are building this with the Lord. It does not stop our covenant of tithing or giving or sowing.
How to build an emergency fund
Answer these questions:
As an ant, if winter shows up today? How much food should I have to survive it?
If I were jobless/out of a business today, how long will it take me to get another job/build another business? How much do I need to survive in this period?
While you answer this question
- Open a separate account.
Call this account: Don’t touch it. All the money goes here.
- Automate It.
This is best. No, seriously. Talk to your bank about setting up a direct debit on your account into another account.
- Let it go
As long as money leaves your spending account into your Emergency Fund account? Let it go. Do you have money? Nope. The Emergency Fund only exists when it is time to fund it or during emergencies.
- Know your cap.
Don’t turn this into a regular savings account o. No o. You know “saving for a holiday” or “End of the year turn up savings”. No, this is the wrong place. Set a cap for this account based on your lifestyle. Your Emergency Fund can be N1,000,000 because of your answer to the ant in winter question. (by the way, N1,000,000 is a scam. Remove one naira and one is no longer a millionaire. *sigh*)
My advice to you today is simple: Start. Start small. Start big. Can you move your entire bonus into your emergency fund? All you have is 1k? I can only afford to save 5% of my income? Just start.
One day, you might need that money to rebuild your life. To get back on track…
Take it from someone who has experienced emergencies in her life – You need this fund.
ExtraTip: You can put your emergency fund in a low-risk mutual fund with an Asset Management company that gives you instant (max: 48-hours) access to it. Let it grow.