A car repair. An emergency trip to the vet. Unexpected dental work. A broken appliance.
Most of us will face an unexpected expense at some point. The question is whether we're prepared when it arrives.
That's the thinking behind this year's Sorted Money Month theme, "The difference is an emergency fund."
It's a reminder that building financial resilience starts with preparing for the unexpected and creating a financial safety net that can help us weather life's curveballs.
Money has a significant impact on our wellbeing, yet many New Zealanders continue to feel financial pressure.
These figures highlight why financial resilience matters. While we can't predict every challenge that comes our way, we can take steps to be better prepared for them.
An emergency fund is money set aside specifically for unexpected expenses.
Whether it's an urgent car repair, medical treatment, a vet bill or an appliance that suddenly stops working, an emergency fund can help absorb the financial impact without forcing difficult decisions or reliance on debt.
The size of an emergency fund will vary depending on individual circumstances, but having something set aside can provide greater flexibility, confidence and peace of mind when the unexpected happens.
One of the most common questions people ask is how much they should keep in an emergency fund.
While there's no one-size-fits-all answer, a commonly recommended starting point is three to six months' worth of essential living expenses. This includes things like rent or mortgage repayments, utilities, groceries, insurance and other regular commitments.
The right amount will depend on your personal circumstances.
Someone with a stable income, strong job security and fewer financial commitments may feel comfortable with a smaller buffer. Others, such as people with variable income, dependants or higher monthly expenses, may prefer to hold a larger emergency fund.
If building several months' worth of savings feels overwhelming, don't let that stop you from starting. Even a smaller emergency fund can provide valuable peace of mind and help cover unexpected expenses without relying on debt.
When it comes to building an emergency fund, most people focus on how much they should have set aside. Just as important is where those savings are held.
For many people, a bank savings account is the natural place to start. Having money available immediately can provide peace of mind when an unexpected expense arises.
An emergency fund is designed for exactly that purpose, so keeping those funds readily accessible in a transaction or savings account often makes sense.
Beyond that immediate emergency buffer, some investors choose to think more broadly about their financial safety net and how other savings could work for them.
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While it isn't intended to replace cash needed for immediate spending, investors can typically access their money within three - five business days*, making it a potential option for savings that sit alongside an emergency fund. For some investors, this approach can provide a way to keep a portion of their savings working while still remaining accessible if required.
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Emergency savings are often the starting point, but a strong financial safety net can include a range of tools working together.
An emergency fund might be there for immediate needs.
A KiwiSaver investment may help build savings for longer-term goals such as a first home or retirement.
Managed funds can support other aspirations along the way, whether that's travel, education, building wealth, supporting family or future opportunities.
When combined, these building blocks can help create a more resilient financial foundation.
Not every financial goal has the same timeframe or purpose.
Money needed for a potential emergency may require immediate access.
Money invested for retirement may remain invested for decades.
Other goals may sit somewhere in between.
Understanding the role different savings and investment solutions play can help build a more complete financial plan and ensure money is aligned with the purpose it's intended to serve.
Financial resilience is ultimately about having choices.
It's about being prepared when life doesn't go to plan, while still being able to make progress towards the things that matter most.
Whether that's building an emergency fund, reviewing your KiwiSaver investment, considering managed funds or setting a new financial goal, every step contributes to a stronger financial future.
Disclaimer:
This information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be relied on as financial advice. Before making any investment decision, you should seek professional advice suited to your personal circumstances. Past returns are no indication of future performance.
Read the full Product Disclosure Statement here for important information related to the Amova NZ Cash Fund and other investment options available through GoalsGetter.