Don’t Let Life’s Surprises Derail Your Financial Goals

26 June 2023

“I save consistently towards my goals but something usually comes up and wipes it all out.” Can you relate to this? This is one of the most common complaints I hear from clients. Why does this happen?

This may happen because you are saving/investing towards a goal, e.g. a car or home, etc. without having an emergency fund in a separate account. Therefore, when emergencies like a serious illness occur, you may be forced to wipe out the money earmarked for your financial goals and/or take a loan. Do you want to reduce the chances of it happening to you? Here is how:

Ensure you have three to six months’ worth of your regular expenses in a separate savings account and designate it as your emergency fund account. Based on this table, how much do you need for emergency funds?

Total Monthly Expenses	Three (3) Months’ Worth of Regular Expenses	Six (6) Months’ worth of Regular Expenses
E.g.) J$100,000	J$100,000 x 3 months = J$300,000	J$100,000 x 6 months J$600,000

If you are thinking, “That’s a lot of money to keep in a savings account,” You are right. However, if you’re thinking “I should invest instead, so I can earn a higher rate of return, rather than keeping it in a savings account which pays less interest,” please don’t and here is why.

Why an Investment Account May NOT be Best for Your Emergency Fund
An investment requires that you purchase an asset and its value will fluctuate. Each type of investment has its ideal holding period, and in many instances you will not have same day access to your funds. Investments are ideal for planned goals, like motor vehicle and/or home purchases etc. So, just imagine how you would you feel if you were Cheryl who invested her emergency fund in an investment.

Cheryl invested J$300,000 in a stock at J$2.00 per share. Her son had a medical emergency and she needed to pay J$300,000 immediately. Challenge #1: The price of the stock fell to J$1.00 per share, so if she sold, she would lose J$150,000 and still have selling fees. Challenge #2: She could not access the money immediately. She would need to wait until for another investor to buy her stocks (the trading day) and up to another three (3) working days for transfer of ownership in order to finally access the funds. Challenge #3: Since her loss would be over J$150,000, she would still need an emergency loan for J$150,000, on which she would pay the loan processing fees and monthly interest. Wow, that loss would be far greater than if she had it on saving account that pays a conservative interest.

The Better Option, Save on Fees, Be Protected Plus MORE
JMMB Bonus Saver account offers the better option for your emergency funds. Therefore, create a monthly standing order for funds to be transferred from your salary account to your JMMB Bonus Saver savings account, until you reach your target amount. With this account you will get more because: 1) interest compounds daily, plus you get an additional bonus interest twice yearly; 2) you will save on fees, as almost everything on this account is free; 3) your money is protected by deposit insurance from the Jamaica Deposit Insurance Company (JDIC), up to J$1.2M; and 4) access is immediate from the ATM or point-of-sale machine using your JMMB Visa Debit Card.

Do you want to earn a bonus, still save on fees, be protected and have immediate access to your money? Please visit a JMMB branch to start your emergency fund today.

Written by: Michelle Sinclair-Doyley

Manager, Client Financial Education and Partnership