Life in Nigeria can be unpredictable, whether you’re a young adult just starting your career or an established professional, there’s one financial safety net you can’t afford to ignore—your emergency fund! Building an emergency fund might not sound exciting at first or easy as you go on the journey, but trust me, it’s one of the smartest and most essential moves you can make for your financial future.
What is an Emergency Fund?
An emergency fund is simply an amount of money you set aside for life’s unexpected events. Whether it’s a medical emergency, sudden car repairs, job loss, or even a global pandemic (remember 2020? Yeah, The covid times), having a financial cushion can help you handle these situations without stress.
So Why Does Everyone Need an Emergency Fund?
From young adults just learning to manage their finances to adults with family responsibilities, or Millennial to Gen Z, here’s why having an emergency fund is crucial for all:
Peace of Mind
The number one reason to have an emergency fund is peace of mind. Life’s curveballs can cause financial anxiety, but with an emergency fund in place, you’ll have the confidence to tackle unexpected situations without panicking. Knowing you have a backup plan is one of the best feelings—whether you’re saving for a rainy day or a downpour! You can always maintain your steeze and stay composed.
Avoid Debt
Unexpected expenses often lead to borrowing money, especially in Nigeria where loan apps and payday loans are tempting but come with high-interest rates and embarrassing threats even on social media or your Contact list. With an emergency fund, you can cover those expenses without reaching for a loan or adding to already made debts. The Emergency Fund keeps you out of debt and in control of your finances.
Job Loss Safety Net
Whether you’re a fresh graduate or a seasoned professional, job security is never guaranteed. Having an emergency fund allows you to take care of essential needs (rent, food, transportation) while you search for new opportunities. Think of it as a safety cushion that helps you land on your feet whenever the hard times may come.
Flexibility in Tough Times
Having an emergency fund gives you flexibility. You won’t have to scramble or make rushed decisions when things go south. For example, if your car suddenly breaks down or there’s a medical emergency, you can handle the situation calmly because you’ve planned ahead.
How to Build an Emergency Fund
Now to the how:
Start Small, Stay Consistent
You don’t need to save a huge chunk all at once especially if you don’t earn so much. Start by setting aside a portion of your income every month, even if it’s as little as 5%. Consistency is key. Apps like PiggyVest or Cowrywise can help you automate your savings, just incase you might want to break the habit, making the process seamless for you and your financial goals.
Cut Unnecessary Expenses
Take a good look at your spending habits. Are there things you can cut back on to save more? Whether it’s eating out less often or canceling unused subscriptions, every naira counts toward your emergency fund.
Boost Your Income
If you can, consider finding extra ways to make money. Side gigs, freelancing, or part-time jobs can give your emergency fund a boost. Even small amounts like ₦5,000 or ₦10,000 add up over time. Compounding matters.
Keep It Separate
Your emergency fund should be easily accessible but not too easy to dip into for non-emergencies. Consider keeping it in a separate savings account, or better yet, in a high-yield account where it can grow with interest. Remember that Nigerian banks do not give interest rates on a savings account.
How Much Should You Save
The golden rule is to have 3 to 6 months’ worth of living expenses in your emergency fund. That might sound like a lot, but start small and build over time, always remember that your mindset about money matters an awful lot. So, If your monthly expenses are ₦100,000, your goal would be to save between ₦300,000 and ₦600,000. Don’t worry about reaching that amount overnight; the key is to make steady progress.
Remember, Building an emergency fund is a game-changer for your financial life. Whether you’re a young adult navigating life’s early stages or an adult managing more complex responsibilities, having a financial safety net gives you peace of mind and protection against the unknown. Start small, stay consistent, and watch your fund grow—your future self will thank you. Start early, start today.
P.S: Don’t be tempted to touch your emergency fund when it isn’t an emergency.
