Emergency Fund or Investing? Which Should Come First

It is important to know what to save for so that money can’t be misused. Money can be saved for various reasons, among them being saving for emergencies and saving to invest. The question is, which is more important than the other, or are they equally important? I started investing in 2021, and I barely had any emergency fund then, so I would usually suffer in several ways, which I will mention in this article. My biggest problem has always been the ambition to have investments rather than trying to live in the moment, and from that, I learned lessons that made me realize that emergency funds are more important than investing. There are many platforms where money can either be saved for emergencies or invested for gains, but this article will focus on Tsetela because it offers both.

When I began my investing journey, what mattered to me the most was how much I had in my investment accounts, and I overlooked my daily financial needs to the extent that I would often sacrifice money meant for my essentials just to invest. I believed that investing would make me rich. This mentality got me into trouble because I would often end up taking small student loans, which resulted in me having to pay interest. It is one thing to have money readily available for emergencies and another to have to take out a loan to deal with emergencies because accessing money in investments could take a very long time.

Usually, emergency funds are defined as money that is readily available for emergencies and can cover up to 3–6 months of expenses. This can be especially important when one loses a stable job because they would need another source of income, and an emergency fund can serve as that source until a more stable one is found. I will be honest, an emergency fund is not always easy to build, but it is possible. For example, I used to work in retail and felt like the job was too much for me, and that quitting would bring me peace. However, I realized that I would need an emergency fund that could cover my expenses for at least three months after quitting. I spent months trying to build it but eventually couldn’t until I started looking for other sources of income. Most of my money was drained by groceries, transport to and from work, and other expenses. In short, earning minimum wage makes it difficult to build an emergency fund unless other sources of income are explored. However, I was still able to invest money because every month I set a certain portion of my income aside for investing.

An interesting pattern to follow after receiving an income, such as a salary, is to cover basic expenses, then build an emergency fund, ideally for 3–6 months of essential expenses, and then invest consistently for longer-term goals. Once an emergency fund is fully built, you can direct more of your monthly surplus towards investments. With Tsetela, this is possible because it allows for both emergency funds and investments. Imagine dedicating a certain amount of your income towards building an emergency fund, and it also happens to be an investment. An investment is putting money into an asset with the expectation of earning a return, so while keeping money in Tsetela as an emergency fund, it will also be earning returns. Additionally, money from Tsetela is accessible within 72 hours. Also, unlike mobile moneys Tsetela doesn’t tempt people to use their money anytime. However, I would personally discourage people from investing solely because of returns under any given type of investment because investing was never really meant to make anyone to be instantly rich, but rather to help people with surplus money maintain and grow it until they need it. Returns should also be viewed from a long-term vantage point rather than a short-term one.

In conclusion, while investments play a very crucial role in our lives, it is more important to have an emergency fund first, ideally one that can cover 3–6 months of essential expenses. Some investments can be quite difficult to liquidate, hence the need for emergency funds that can provide access to money almost instantly. An example would be insurance claims, which usually take a long process, or having to sell shares, bonds, or other types of assets when an emergency arises. Luckily, there are platforms such as Tsetela that can provide both benefits.