Without doubt, the Nigerian economy is in recession. This has forced several private firms to retrench their staff while state governments owe workers some months’ salaries.
To avoid being caught unaware, Nigerians have been advised to create an emergency fund account to cater for some unavoidable circumstances, like job losses or accidents.
Aside from doing other jobs on the side in order to make ends meet, it is important for you to create an emergency fund.
An emergency fund is cash that you have saved for the sole purpose of helping to maintain your normal life through the emergencies that life hands you.
When you save for emergencies, you are not expected to touch the fund at all, irrespective of how pressing the issue may be.
For example, with the financial challenges bedevilling the country at the moment, there is a greater chance of job loss knocking at the door of most employees.
Quite often, people who don’t have an emergency fund see the idea of having to save up money as some form of punishment after all.
But, it’s quite the opposite – having an emergency fund means that you do have room to breathe. You don’t have to completely panic if your car breaks down, if you lose your job or if you suddenly need to replace your property that got damaged. Instead of having to find some way to squeeze those expenses onto a credit card or beg a friend for some money to help, you can just pay the bill with little or no worries.
EXPERTS’ ADVICE
A financial counsellor, Dr. Alaba Olusemore, explained that it is important for every household or individual to save, whether we are in a recession or boom, because in this time of economic crisis one might be tempted to spend more due to inflation.
He said that it was very wise to save at least 10 per cent of one’s income in order to meet unforeseen contingencies.
Even if you approach a bank for a short term loan/ credit, he added that they might not grant it for obvious reasons, ranging from forex crisis to the ‘technical recession’.
Also, your relatives might not be able to assist in times of need because they might be facing similar drought too. But if your emergency saving is in place, it will assist you in the event of a job loss. Whatever income you make, you must ensure you save at least 10 per cent. Olusemore said, “Set a target for the emergency fund. Ensure it is a target that can sustain you and the family for at least three months in case of job loss. Do not set unrealistic target but something that can be achieved based on your income. Curb late night meetings with friends and colleagues and divert money meant for such avoidable expenses to the emergency fund.”
Another financial analyst, Mrs. Aderonke Abaji, urged both salary earners and entrepreneurs to avoid frequent use of their Automated Machine Card for transactions as much as possible in order to reduce their monthly bank charges and save such excesses in the emergency fund.
“It is advisable to use public transportation in some rush hours to avoid burning more fuel in traffic. Find someone that lives fairly close to you who works where you do and start carpooling together or use public transport. Even if you can only do it a few days a week, you’ll still drastically cut down on your transport/fuel expenses. More over, it will be a lot harder to stop for that impulse spending while moving.
“Get in the habit of using public transportation for your commuting needs. Most metropolitan areas have surprisingly good public transportation options and they are far cheaper and not all that much more time consuming than driving yourself,” she advised.
Abaji added that trimming avoidable monthly bills and annual levies is another way of saving expenses for the emergency fund. According to her, monthly and annual levies of some social clubs can be cut.
“Paying for some premium cable channels that you do not have time to watch most times is a waste of resources. All unexpected money that is spent without plans should be saved and pretend they did not come. Transfer such money to the emergency account immediately and do not procrastinate,” she said.
