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:. AMANA EMERGENCY FUND

emergency_fund.jpgAmana Emergency Fund


Save for a Rainy Day.

Everyone needs an emergency fund…
Even companies do.Investing in the Amana Emergency Fund is not a luxury, it is a necessity. At Amana we recommend that you should maintain a cash reserve large enough to cover three to six months worth of your expenses. Rest assured, someday you will need it.
We all know the saying"save for a rainy day". It is a wise saying, which many of us often ignore and yet all of us must face a rainy day every once in a while.

What Will You Need?
An emergency fund is a great idea, but it also requires some effort to achieve. The first step in the process is to know how much you spend each month in terms of all your recurrent expenses such as rent, food, transport etc.
Once you know how much you spend per month, you need to multiply that figure by three to come up with the level of savings you need to cover three months of expenses. Assuming that your expenses amount to Kshs 50,000 per month, you will need to save at least Kshs150, 000 into your emergency fund. 

Why So Much?
The amount of money required to setup a proper emergency fund is certainly significant, but we live in uncertain times with uncertain economies. Unemployment can happen unexpectedly, usually at the worst possible moment. Likewise, emergencies can be expensive (sudden illness of a loved one, an emergency in our extended family, an unexpected car breakdown), and there is never a "good" time for these things to happen.
While its probably true that you don have an extra Kshs 150,000 lying around, Amana Capital is able to help you build up an emergency fund over a period of time.

Where do I start?
Now that you have things in perspective, its time to start saving. Approach this effort the same way you would approach any other financial goal. Put together a plan and execute it. The first step is to determine how much you spend each month. Housing, transportation and food will likely be the three categories that eat up most of your cash. (The average Kenyan spends 65% of his or her income on these items.) Once you know your total expenses for each month, multiply that number by three. Reaching that number will be your initial goal. To achieve your three-month target, you need to start saving money.
If we assume your initial goal is Kshs 150,000 and you want to reach that goal within 6 months, then you must save Kshs 25,000 each month for those 6 months. On the other hand, if you want to build up your emergency fund within 12 months, you will need to put away Kshs 12,500 per month.

Putting Your Plan into Action
Ideally, you should treat your emergency fund like any other recurring bill that you must pay each month. Dedicate the appropriate amount from your salary and set it aside. While most people have no qualms about sending enormous amounts of money to credit card companies on a regular and systematic basis, they balk at the idea of paying themselves first. Change that equation. Cut up your credit cards and put those payments into your emergency fund.

If you are among the many investors who don have a "rainy day" fund stashed away in case of emergencies, theres no time like NOW to start saving.


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