When Building an Emergency Fund, How Much is Enough?

Despite the cost of living crisis, one still has to build an emergency fund that’s enough to over three to six months’ expenses.

This fund is paramount as it helps cover unexpected costs such as medicals and car repairs. Of course, a person can fall back on such plans whenever he or she loses their job.

Here’s a breakdown of key points:

The generally accepted standard is a three to six months of expenses. That is, you should have set aside some money within these time periods depending on the dependents or less job securities.

If you set aside N50,000 per month, you have saved N150,000 in three months and N300,000 in six months.

It is important to take into consideration your personal situation: job security, cost of living, family dependents, and ability to find a new job quickly.

An emergency fund should be kept in an accessible, safe place like a money market mutual fund or high-yield savings account.

The fund is meant to be used for real emergencies and replenished as needed.

In summary:

Start saving to cover at least three months of essential expenses. If your situation requires greater security, aim for up to six months or more.

Save gradually by setting aside a percentage of your income regularly until you reach your goal. This approach helps protect you from financial shocks without going into debt.

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