Basic Cents, Business, Features

It’s an Emergency

By Samuel Rosenberg

WHEN you have no money in your bank account, savings, or even your children’s piggybank, the smallest financial emergency can leave you devastated and having to make decisions about who you are not going to pay so you can fix your vehicle, computer or cellphone.

Friendly advice from your bank manager, work colleagues or friends will include asking about your emergency fund. This is money that you should have set aside exactly for these circumstances.

An emergency fund is a common, and indeed, a vital component in the financial well-being and planning of every individual. Simply, it provides money when an unknown emergency requirement arises.

An alternative to some unexpected financial difficulties is to purchase insurance coverage. A small policy premium is often available at the time of purchase, or later, to cover against complications arising when you purchase a vehicle, gadgets and high-tech goods.

Nevertheless, you cannot cover every possibility with an insurance premium. Either the total cost becomes unworkable within a home budget or the cover is simply not available. This is when a cash reserve can be kept as savings. Any interest you earn on that money in your savings is an additional income, and should not be neglected.

There are many reasons to hold an emergency fund. You may lose your job and while out of work, those bills still need to be paid if you are to avoid further aggravation and debt problems.

You or your pets may need some emergency health care. Health insurance may cover these circumstances, but you may still be required to pay the first part of the invoice.

Should your home be damaged during poor weather or just wear and tear, your insurance cover may not be sufficient to cover the expenses and you may have to pay a deductible, before receiving some funds to complete the work.

An emergency fund may be required if you have not budgetted correctly to meet your annual tax bills. Your government will not wait for money when you say you cannot pay.

On occasions, there may be a requirement for you to travel long distance or overseas. An illness or death in your family could force you to buy flight tickets at a day’s notice and this will certainly be the most expensive flight ticket you can purchase.

A major cost that many people forget is that of a funeral. The person who has died may not have left funds to cover the funeral and service and it may become the responsibility of close family to find several thousand dollars at short notice.

Where you are able to set aside a regular amount of money that you do not need each month, you will be building up an emergency fund for your long-term financial planning. With an emergency fund in place, you and your family will be less worried should a situation arise that demands an immediate amount of money from your savings.

Samuel Rosenberg is the founder and CEO of Axcel Finance Ltd., the leading regional microfinance institution. Share your thoughts and email your questions to

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