How to Build an Emergency Fund for Unexpected Bills in Nigeria
Unexpected bills can disrupt even the most carefully planned budget. It takes the form of an unanticipated hospital bill, car repair, a sudden increase in utility bills, or even being laid off. Having and building an emergency fund would provide you with a much-needed safety net, especially with the rising cost of living in Nigeria. In this article, we will guide you through building an emergency fund that offers you peace of mind and financial stability.
But first,
Why do you need an emergency fund in Nigeria?
Because it is a no-brainer!! Imagine you’re a middle-class individual earning a decent salary, and a few days to month’s end, the company announces that it is dissolving and would have to put off paying staff salaries as it has debts to clear. What do you do in this scenario where you have placed your monthly utility bill payment and living expenses on that salary? Without an emergency fund, the only other option is to seek out friends and maybe family for help because you do not want to die in silence.
So, what is an emergency fund? Think about it as a financial safety net that you set aside to cover unforeseen expenses. In Nigeria, where economic uncertainties and constantly fluctuating prices are common; having an emergency fund is a lifesaver you didn’t know you needed until now. An emergency fund serves as a cushion and Plan B against:
- A sudden illness that requires urgent medical attention,
- Unexpected spikes in electricity bills and other living expenses,
- Unplanned visits to your mechanic for generator or car repairs, etc.
Do you now agree that you need an emergency fund in your life? Yes? Come along let’s help you get started.
Steps to build an emergency fund
1. Set a realistic savings goal
First, determine how much you need in your emergency fund. A good rule of thumb is to aim for at least three to six months’ worth of essential expenses. However, if that feels too daunting, start with something smaller and reasonable.
2. Create a budget
If you’ve been a spontaneous spender going wherever the tide leads, it’s time to take hold of the reigns of your ship and create a budget to help you identify and structure your expenses. Don’t know how to create a budget or you are tired of complex budgeting templates? We’ve got you. Below is a curated catalog of short YouTube videos to guide you.
# Video 1
# Video 2
# Video 3
3. Start small and be consistent.
You do not need to set aside a large amount at once. Take baby steps. Start small, even if it’s just ₦500 or ₦1,000 per week. Consistency is key. Also, automate your savings by setting up a standing order with your bank or mobile app to transfer a fixed amount to your emergency fund each month.
4. Cut your coat according to your cloth.
Look for ways to cut down on non-essential expenses and live within your budget and current earnings. For example, you can opt for more cost-effective transportation options (e.g., swapping regular Uber rides with BRT or Danfo vehicles) and buy food items in bulk. Every small saving can add up.
5. Use high-yield savings accounts or investment platforms.
Instead of keeping your emergency fund in a regular savings account, consider opening a high-yield savings account with Nigerian banks or using digital savings platforms like PiggyVest (FlexNaira) or Cowrywise. These platforms often offer better interest rates, allowing your savings to grow faster. Make sure you also compare interest rates from different banks and digital platforms to find the best place to keep your emergency fund. Also, ensure it is accessible in case of an emergency.
6. Pay your bills on time.
To effectively build and maintain an emergency fund, you must pay your bills on time. When you avoid late fees and penalties, you’re essentially increasing the amount you can allocate to your emergency funds and you can avert service disruptions such as utility shutdowns which can be inconvenient and costly. So, get into the habit of paying your bills on time and avoid unnecessary costs and stress.
7. Get the Lifestyle App
To help you on your emergency funds journey, we have built a companion for you — The Lifestyle App. It saves you time and energy trying to track your expenses. You can also make all your payments from one place and schedule payments. This way, you can automate your bills and avoid late bill payment fees as you try to maintain your emergency fund and stay afloat at all times.
Conclusion
Building an emergency fund may seem challenging, especially in a country like Nigeria, but it’s a worthwhile investment into your financial security. If you follow the steps above diligently, you can stay committed to your savings goals and create a safety net that will protect you from life’s unexpected twists and turns and ensure your financial peace of mind. Until the next one, join the waitlist for the Lifestyle App and be among the lucky thousands to get a first-hand experience of the ease of bill payments. Adios✌.
