How To Build An Emergency Fund In 3 Easy Steps

Tolu is currently experiencing difficulties managing her finances. She has a habit of accepting financial aids at the end of every month. She seems overwhelmed with problems – her car breaks down often, increased payment of a loan that has accumulated in interest, unexpected hospital bills and other unplanned expenses. If you share some of Tolu’s problems, keep reading to discover practical tips you can use starting today.

“Don’t you want to become financially independent?” She asked again, and by this time tears had started to roll down Tolu’s face. She couldn’t imagine how much of a financial mess she’d found herself in.

“Mum, I’ll fix this. I just need this loan. Just this one!”

“There you go again! Another loan for you to depend upon! I’m trying to get you out but you keep digging yourself into a hole.”

“I’m sorry Mummy but I have to pay up Bukola’s school fees or else the admission will go to someone else.”

“See, Tolu! There are some things we don’t bargain for in life that just happen. Look at how you are playing with your child’s future.”

“You have a good job. In fact, what your monthly salary is way beyond an average Nigerian’s. If you continue this way, your lack of financial education could limit your financial security in the future. You need to change your money habits.”

“Ohhhh, Mummy! What have my habits got to do with this now?”

“Can you stop being naive, and learn some lessons from what you’re going through? Didn’t you receive your salary last month? Couldn’t you have sorted things out with the money?”

“It’s not like that! I had debts to pay back. There were loans I got which I used to handle some emergencies in the past.”

“This is why having an emergency fund is very essential. Remember I talked about your habits earlier. Creating an emergency fund is a good practice with money. It is a form of financial security for emergencies and/or unforeseen expenses. Your Dad and I practised this a lot while we were raising you guys.”

“You’re correct, but things are a bit different with us new generation of parents. The cost of living is much higher than it was back then. House rent, transportation, electricity are much costlier than it was back then. Society wasn’t as civilised as it is now. So it was easy for him (you and dad) to meet up with your financial responsibilities.”

“What your Dad and I had in those days is something many adults in your generation lack.”

“What’s that?”

“Financial planning, budgeted spending, a culture of saving and so on. What we see these days are parents who enjoy the Rat Race. They satisfy their cravings when it comes to money, and are not wise financially. Can I ask you that question a third time?”

“What question, Mum?”

“Tolu, do you want to become financially independent?”

“Yes”, she let out on a sigh.

“Then you need to learn how to manage your finances. What if I told you you’re working as a slave (to money) even though you live in a good house and earn a decent salary? There’s a lot you need to learn but let me first of all deal with saving for the future because there will always be emergencies. Shall I go on?”

“Yes”, Tolu answered, this time hopeful.

An approach to building an Emergency Fund

1. Analyse your current expenses

“Check how much you spend monthly on bills and other expenses and subtract the total amount from your monthly income. This should give you an idea of how much you have left and what you can put aside for the rainy days.”

“So like how much do I need to save for emergencies?”

“What your Dad and I used to do back then is to have enough funds in a savings account to cover our average expenses for three to six months. We used the money in this account for unexpected expenses like car repairs and taking you kids to the hospital when you got sick.”

“Oh! I see. There’s really a lot I need to start practising. But where do I start?”

“First, you need to be intentional with your spending. Then you can start small. This can be a tenth or one-fifth of your income. And mind you, an emergency saving fund is separate from your regular savings. Find out how much you’re comfortable saving and be consistent.”

2. Set a target for yourself

“Oh! No Mom. I don’t like challenges.”

“Don’t worry. I’ll make this one simple for you to practice. Can you remember that small rectangular wooden box in Grandma’s sitting room?”

“Yeah, the one she used to put change in when she got back from the market?”

“Exactly! The whole idea is to instill discipline in some people who can’t manage themselves financially. E.g. …”

“Mom abeg abeg don’t start o. I’m already enjoying this lesson. Don’t make me feel bad again.”


“But where can I find such wooden boxes again. Are they still available in this time of ours?”

“Physically, yes there are available. But they are also in the form of fixed deposits and target savings in banks and alternative financial institutions. I’ll give practical examples when we get to opening an emergency saving account.”


“So a savings challenge can mean that you put away a small fraction of your income every month. You can prevent yourself from having access to these funds for the next 30, 60 or 90days until you meet your target of three to six months monthly expenses in advance. It can be a Monthly saving target, Bi-monthly or Quarterly based on convenience.”

“But wait! I’m curious. How do I prevent myself from dipping into this fund?”

3.Open a savings account

“Once you’re able to open this savings account, set up a system that enables the funds to go into it without you being physically involved in the process. What I’ve seen some people do is to set up automatic payments or deductions (from their salary) into this savings account. You can discuss this automatic transfer payment plan with your bank’s account officer. It makes it easier to save for emergencies when you actually forget to do so at the end of every month.”

“Wow! Mom, you made this finance thing so easy. Thank you, and I hope to apply every lesson. But you didn’t quite answer the question I asked. You only touched the surface.”

“What question are you referring to?”

“The question about how to prevent oneself from the temptation of withdrawing from this account.”

“Tolu, would you like to know the truth?”

“Yes! Certainly!”

“It is discipline. Financial Discipline!”

“Yeah! I knew that was it. I just didn’t want to be honest with my indiscipline about finances.”

“You’re right my dear. But don’t worry, we’ll discuss Financial Discipline some other time.”

“Yeah! I have to go now, Mom. Thanks for the lessons. Bye!”


  1. Antriksh
    April 18, 2020 @ 5:53 am

    Thank you for sharing such a nice read.
    What a simple yet very effective way


    • femmeminty
      April 18, 2020 @ 1:01 pm

      Thank you Antriksh,

      I am glad you enjoyed reading the article! It’s so important to build an emergency fund or a raining-day fund to meet life’s uncertainties.
      For more interesting content of financial literacy, I’d like to encourage you to subscribe to our newsletters



  2. Kelechi
    May 28, 2020 @ 5:20 pm

    Thank you for this article.
    It was eye-opening.

    I have two questions.
    1) After you reach your emergency fund goal of 3 – 6 months salary, say by using a fixed deposit, should you continue to put money into your emergency fund?

    2) What are the benefits of a regular savings account or plan apart from the emergency fund savings account?


    • femmeminty
      May 30, 2020 @ 6:45 pm

      These are great questions.

      1) Absolutely, you should continue to put money in an emergency fund If you can afford to put more than 3 to 6months of salary in a fund. I would say you are one of the people who can afford to do that. You can build up your savings by putting contributing more money in your pension fund or a high interest savings account. The more money you set aside in savings, the greater the benefit from compound interest and higher the value of your savings over the long term.

      2) The benefit of a regular savings plan is the discipline you get that you are putting away funds for a rainy day or when you might need it. No one predicted the pandemic which has created a lot of uncertainties for job security. If you develop a habit of putting aside regular savings, you get a sense of security that you can withstand any of life uncertainties that comes your way particularly when money is involved.


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