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Whether it’s urgent car repairs, last-minute travel for a family emergency or an unforeseen and hefty medical bill (for yourself or a pet!) - life is full of unexpected situations.

On the more extreme end of the scale, we’ve seen the impacts of a global pandemic that damaged the health, social bond and economic security of millions around the world. The risk of job losses, serious health issues and disruptions to our home life were all too real.

There’s no doubt that a sudden loss of income can cause significant stress. In those situations where you need cash today, your emergency fund steps up to save the day.

What is an emergency fund?

An emergency fund is an easily accessible source of money that acts as a safety net in case of any unexpected emergencies where you need cash. Its sole purpose is to help you manage any sudden expenses and minimise financial stress.

How much should I have in my emergency fund?

It’s hard to provide a single figure of how much we should have in our emergency fund. The amount will depend on your personal situation and comfort level.

A few factors that you may need to consider when working out how much cash you need are:

  • Are you the sole income earner?

  • Do you have a family that could provide financial assistance for emergencies?

  • Do you have children?

  • Do you have large, regular costs such as a mortgage?

Common emergency fund approaches:

  • One to three months net income. To replace your income should you need unexpected time off work.

  • Three months' worth of loan repayments or rent, plus bare minimum living expenses (such as groceries and other bills)

  • A minimum of $5000 for a single, or $10,000 for a couple.

What should I use my emergency fund for?

In most cases, it’s unlikely you’ll need to touch your emergency fund for a long time - or at least we hope!

To give you an idea of when you might use it, we asked the Kernel team for examples of when their emergency fund came to the rescue.

  • Waking up with a toothache resulting in a costly trip to the dentist and a $5,000 solution.

  • Time off work for a small medical procedure that cost a cool $6,000 out of pocket.

  • A blown-up car engine between Hamilton and Auckland (eek!).

  • A very expensive trip to the vet to save the life of a cute kitten.

  • An unexpected death in the family that required last minute expensive international travel.

So, when should I start my emergency fund?

There’s no time like the present! As unsettling as it is to think about (and as our examples above illustrate), you can’t predict emergencies. Unexpected events don’t wait around for when you’re ready, so it’s not something you should put off.

If you haven’t started an emergency fund yet, we are challenging you to get onto it today!

If you have some savings already, then you can move some of it into a separate savings account and build it up further from there if necessary. If not, you can start by putting regular, small amounts of money aside every time you are paid.

An exception to prioritising this is making sure any high interest debt is paid off first. This could include credit cards or personal loans. Given your emergency fund needs to be in an easily accessible savings account, it’s likely it will have a low interest rate. There is no point saving at 2% interest of less if you are paying off 20% interest debt elsewhere.

Where should I keep my emergency funds?

You’ll need to be able to access your full emergency funds within a day of two if you find yourself in a sticky situation.

Unfortunately, in today’s low interest rate environment you can’t expect much of a return on this pot of money, but you can still earn something by considering the following:

  • Savings account. Most banks offer on-call or savings bank accounts. The interest rates are typically low and major banking providers in New Zealand are fairly safe. If you are using a savings account, you’ll want to look for no or low fees. I.e. Watch out for monthly account fees, or interest rates that depend on regularly investments and no withdrawals.

  • Term deposits. This will give you a higher interest rate that mot savings or on-call bank accounts, but your money will be locked away and there will be a penalty fee if you need to access the money early. If you are wanting to get a higher return on your emergency fund, then this may be a better option.

  • A combination of account types. You may actually choose to have part of your emergency fund in a savings account and the rest in term deposits or a Notice Saver account like Kernel’s Notice Saver. As you will need to be able to manage and access these funds easily, remember to keep it simple and easy to manage.

So, there you have it! A simple guide to setting up your emergency fund that will make sure you’re ready for any unexpected events.

Some top tips to summarise:

  • Calculate your monthly minimum expenses and consider your personal circumstances when working out how much you need in your emergency fund.

  • Remember to look at fees as well as the interest rates.

  • You don’t need to have your emergency fund at the same bank as your day-to-day bank. In fact, if it is with a separate provider, you may be less tempted to touch it unless absolutely necessary.

  • is a great site to find the latest term deposit and savings account rates.

For more on emergency funds and other financial wellness tips, check out episode 15 of the It's No Secret podcast below.

Dean Anderson

Dean Anderson

Founder & Chief Executive



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