How an emergency fund can help during load shedding

Load shedding can be likened to that one annoying mosquito that you can’t get rid of in the middle of the night. While it’s not as easily resolved as breaking out the bug killer, there are ways you can alleviate some of the stress and inconvenience.

An emergency fund is one such measure. We consider what an emergency fund is, and how you can use it to buffer the impact of load shedding.

What is an emergency fund?

James Williams, head of marketing at Wonga, refers to an emergency fund as a “rainy day fund.”

“It’s an amount that you set aside, grow, and use should an event or circumstance jeopardise your cash flow,” he says.

This event or circumstance comprises unforeseen expenses and emergencies that are not included in your monthly budget. Williams notes that having an emergency fund ensures that, should a crisis arise, you have a financial safety net that covers most, if not all, of your expenses.

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How to start an emergency fund

The first step in starting an emergency fund, Williams says, is to create a practical and realistic budget.

“Start by evaluating your cash flow,” he advises. "You need to know exactly how much money is coming in and what you’re spending on living expenses and debt.

Once you have a clear picture of your finances, he says, “you’ll be able to see what you can spare each month, or where you can re-prioritise your expenses to enable you to gradually save up over time.”

Kathryn Main, chief executive officer at Money Savvy Group, says that there are five main steps you should take to establish an emergency fund.

Step 1 – “Make a decision about how much money you are going to save each month towards your emergency fund. I would suggest starting small and saving more as time progresses,” she says.

Step 2 – “Decide on the saving mechanism you want to use and research the pros, cons, and costs. Aim for the highest interest rate with the lowest bank fees, and make sure you can access your money when you need it.”

Step 3 – “Try to automate the saving process. Set up a debit order for the day you get paid so you are not tempted to spend the money.”

Step 4 – “Don’t take on any more debt. If you have debt, prioritise paying it off. This will free up more money for you to save.”

Step 5 – “Update your budget to include your new savings amount,” she concludes.

Is load shedding considered an emergency?

Williams notes some typical examples of an emergency. “These include loss of employment, illness, a motor vehicle accident, a maintenance issue in your home, or any other form of financial stress that you may experience.”

With load shedding wreaking havoc on an already-stressed economy, it certainly falls within this category.

Since the start of Covid, many companies have opted to implement hybrid working arrangements or work-from-home policies. However, not everyone has access to backup energy. This has resulted in a loss of working hours, impacting the income of companies, and consequently, employees.

Using your emergency fund wisely

Main notes that purchasing backup energy is a wise use of your emergency fund, because, quite simply, if you can’t work, you can’t support your family.

“You are the biggest asset in your life,” she says. “You need to ensure you can make money off that asset.”

Uninterrupted power supply (UPS) units have been the go-to backup for many, being among the more economical options. The units are priced from roughly R550, however, they are not designed for continuous power supply, and battery life will dwindle with constant usage.

To outlast a load shedding event, you can consider investing in a small power trolley, which combines an inverter and a high-capacity battery. This will set you back upwards of roughly R5,000.

Generators are a longer-term, albeit noisier, solution. Smaller generators are priced from roughly R2,000, however, they require fuel to run, pushing up the expense.

A final alternative is a small solar set-up, comprising a battery and solar panel. This will enable you to power several small devices including a laptop and screen, and will set you back about R3,500. Should you wish to invest in a more advanced solar kit consisting of a battery, inverter, regulator, and solar panel you’d be looking at around R7,500 upwards.

Ultimately, investing in an alternative source of power is initially costly, however, it will pay dividends. By choosing the right option, you shouldn’t need to deplete your entire emergency fund, and you’ll be able to work, thus continuing to build up your reserves.

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