Investing involves risk including the possible loss of principal and there is no assurance that the investment will provide positive performance over any period of time.

The information provided should not be relied upon as investment advice or recommendations and should not be considered specific legal, investment or tax advice.

Any information we provide is general only and current at the time of writing.

Kernel Wealth Limited (Kernel) is the issuer and manager of the Kernel Scheme. 

 for the Product Disclosure Statement. Past performance is not an indicator of future returns.

All returns are exclusive of tax. As PIE tax and withholding tax on interest earnt depend on personal factors, it would be confusing to include and unlikely to change the outcome. We have used the NZX50 gross index daily price series, where all dividends were reinvested on ex-date, exclusive of fees. Fees would have a negligible impact on the relative outcome of the different strategies.

Savings were made every Thursday for weeks in a row with investments made at market close. The 90 day bank bill rate was used for illustrative purposes, in reality cash savings account rates vary periodically. Past performance is no indicator of future performance for any investment. This article does not constitute financial advice, as your personal circumstances have not been taken into account.

 There are alternatives available for individual investors, including comparable value and de minimis exceptions but the hassle and associated cost likely outweighs the benefit achieved for most investors. Any NZ fund manager only has the FDR option. 28% is the PIR rate for those earning over $48,000, but if individually investing in companies the rate is up to 39%. Please note this is not tax advice as we are not a tax accounting firm and we don’t know your situation.

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 you will find references to an emergency fund – something that can help you out in unexpected situations. This includes things like an unexpected medical event, an urgent need to travel or fixing a leaking roof.

How much should you have in your emergency fund?

There are many methods to determine how much cash you need in your emergency fund. The choice is yours and it really depends on your comfort levels.

Here’s a few common methods you could use:

One months net income – to replace your income for one month should you have unexpected time off work

Three months worth of loan repayments or rent plus bare minimum living expenses (like groceries and bills)

$5,000 for a single and $10,000 for a couple

Determining how much you need really comes down to the type of scenario you would need to access the funds and how comfortable you are with uncertainty.

For example, if you were to require the money for an unexpected medical event but you have a large sick leave balance at work – you may be comfortable with less in savings. The problem with this, however, is you can’t predict what potential emergency may arise (although we hope it never does!).

What would you use your emergency account for?

No one likes a negative nelly and it’s not fun to think of the *worst case scenario*, however, bad stuff does happen and being under financial stress during a difficult time is not the position you want to be in.

Murphy’s law will mean you are unlikely to have an event happen for quite some time – and the temptation to use your emergency fund on a trip to Europe will be real.

Amongst the team at Kernel, we’ve had to access emergency savings in the following situations:

Waking up with a toothache resulting in a costly trip to the dentist (and a $5K solution)

Time off work for a small medical procedure that cost a cool $6k out of pocket

Car engine blowing up between Hamilton and Auckland and being quite stranded

A very expensive trip to the Vet to save the life of a cute kitty

Unexpected death in the family that required international travel

When something does happen, can you really put a price on the comfort of knowing you can make whatever you need to happen, and you won’t end up in debt at the end of it?

Whatever number you land on, make sure you always keep this separated from your daily spending. It should be accessible, but not too accessible.

blog header image_you need an emergency fund

You've heard you need an emergency fund - but why? And how much should you have in your emergency fund? Find out all you need to know!