emergency fund
An emergency fund is money set aside purely for a crisis, held somewhere safe and reachable within days.
In plain English
An emergency fund is the least exciting thing in personal finance and the one that decides everything else.
Life in Nigeria delivers surprises. A car that dies. A hospital bill on a Sunday. A job that ends without warning. Without a fund set aside for exactly this, every one of those events turns into borrowing, and borrowing at Nigerian interest rates is how a bad month becomes a bad three years.
The rule of thumb is three to six months of your essential spending. Not your income, your spending. Rent, food, transport, school fees, the things that do not stop when your salary does. If your essentials come to ₦250,000 a month, you are looking for somewhere between ₦750,000 and ₦1.5 million.
That number frightens people, so build it in pieces. One month first. Then two. It does not need to arrive quickly, it needs to arrive.
Keep it in a money market fund rather than a current account, so inflation does not eat it while it waits. Close enough to reach in days, far enough that you will not spend it on a weekend.
Your essential monthly spending is ₦200,000. You build up ₦1.2 million in a money market fund. Your employer lets you go with one month's notice. Instead of panic, you have six months to find the right role rather than the first one that appears.
Questions people ask
Three months or six?
Three if your income is steady and predictable. Six or more if you are self employed, on commission, or the only earner in your household.
Where should I keep it?
Somewhere safe and reachable within a few days, such as a money market fund. Not in shares, which can fall exactly when you need the money.
What counts as an emergency?
Something urgent, necessary and unexpected. A medical bill qualifies. A sale on a phone you wanted does not.
Last reviewed