Whangārei Care Centre budgeting co-ordinator Dianne Harris said it was essential for Northlanders to have an emergency fund for unexpected financial shocks.
Whangārei Care Centre budgeting co-ordinator Dianne Harris said it was essential for Northlanders to have an emergency fund for unexpected financial shocks.
Northlanders are being encouraged to create an emergency fund as prices soar and uncertainty reigns around the Iran war.
Finance Minister Nicola Willis recently warned that prolonged conflict in the Middle East could push fuel prices even higher, slow economic growth, and possibly lead to fuel restrictions.
WhangāreiCare Centre budgeting co-ordinator, financial mentor Dianne Harris, said it was essential Northlanders had a stash of money set aside to cover unexpected financial shocks.
“These days it’s important, it gives you something to fall back on.
“What people are seeing now is that with petrol costs and prices going up, if you’ve got nothing to draw on it makes it very difficult.
A breakdown of nationwide customer savings accounts showed the average Kiwi had a median savings balance of $2700.
Aucklanders were struggling the most to put money aside, with the lowest median savings balances ($1200).
Northland had the second-lowest median savings balances among Westpac customers ($1400), while nearly half of the region’s population [42%] had a savings balance of less than $500.
Sarah Hearn, Westpac New Zealand’s product, sustainability and marketing managing director, said households and businesses continue to grapple with high costs.
“Saving more money might feel unrealistic for many people right now ... but taking some time to review your overall spending and making small savings commitments can have a big impact over time.”
Former Northlander Cody Black, who recently relocated to Auckland, knows the importance of saving money.
Black, who has a 10-year-old daughter, was referred to Harris last year to help her pay down a “significant amount” of debt.
Former Northlander Cody Black paid off debt and started an emergency fund to benefit herself and her daughter.
Not only has Black done that, she also learned valuable lessons in financial literacy, which included setting up an emergency fund.
“Before working alongside her [Harris] I would pay what I had to pay [bills and rent] then use the rest to buy things for our house or I’d take my daughter out.
“I’d get a new toaster or new things – I didn’t save.”
Black said it took six months to pay off her debt and when she did “it felt like freedom”.
“I have been in consumer debt since I was 16, I’d had that stuff for over 10 years, so it felt so good.
“Then she said create a couple of funds to put aside money, including an emergency fund.
“It was nice seeing those funds grow.
“When my car did need repairs, instead of stressing out ... I already had that money there.”
What is an emergency fund and how to create one?
An emergency fund is a separate savings account set aside for emergencies only, such as unexpected vet or medical expenses, dental work or urgent car repairs.
Independent finance site Sorted recommends pulling together $1000 by selling stuff you don’t need or saving extra hard for a while.
Then put the money into its own, high-interest, savings account and regularly add to it.
Harris advised people to “start small”, even if it’s saving $2 to $3 every week.
“As mentors, we always suggest to people they at least try and have three months’ worth of income in a separate account.
“Once you get into a habit it becomes second nature.
“If you buy a coffee every working day, then forgo one coffee and put that money into your savings account.
“Starting to think about practical ways you can make it work.”
Harris suggests keeping your emergency savings with a different bank, so you don’t see it every day and aren’t tempted to dip into it.
“It’s proving now that if you’ve got nothing to fall back on, things are really tough.
“A lot of people think ‘I don’t really need to save right now’.
“They think they’ve got KiwiSaver there – but that’s for retirement.
“An emergency fund is something that you’ve got to call on should you need to.
“It’s giving peace of mind.”
Jenny Ling is a senior journalist at the Northern Advocate. She has a special interest in covering human interest stories, along with finance, roading, and social issues.
