A question that came up in an investment community group:

Hey guys, I’ve been on the platform for the past 3 months, putting aside R600 via debit order into 3 ETFs. In this last month, I also opened a TFSA and deposited R500, with a recurring debit order set up for that as well. Please note I net less than 10k a month after deductions so hence I can’t go any higher than these amounts.

Ideally, I would like to have an emergency savings fund but I’m not sure how to approach this. Should I do it via a normal bank account or should I use EE for emergency savings?

If you’re investing R1,100 a month on a net income under R10,000, you’re already ahead of most people. But you’re right to question whether you should build an emergency fund first, and where to keep it.

Let’s break this down.

Disclaimer: I am not a financial advisor. This information is for educational purposes only and should not be considered as financial advice. Always do your own research and consider seeking advice from a qualified financial professional before making any investment decisions.

What Is an Emergency Fund?

An emergency fund is money set aside for unexpected expenses — a car repair, medical bill, or job loss. It’s not for planned expenses like holidays or car services. It’s your financial airbag.

The standard advice is 3-6 months of expenses. On a R10k income, your essential expenses are probably R7-8k. That means you need R21-48k saved before you’re properly protected. Check out our complete guide to building an emergency fund for more details.

The Investment vs Emergency Fund Tension

Here’s the uncomfortable truth: you shouldn’t be investing R1,100 a month if you have no emergency fund.

Investments go down. Emergencies don’t wait for markets to recover. If your car breaks down and your ETFs are down 15%, you’re selling at a loss — exactly what an emergency fund prevents.

The correct sequence:

1. Build a R10-15k starter emergency fund (1-2 months expenses)
2. Then split: continue emergency fund to 3-6 months while investing smaller amounts
3. Once emergency fund is complete, invest more aggressively

Bank Account vs EasyEquities: Pros and Cons

Bank Savings Account

Pros:

• Instant access (ATM, transfer)
• Zero risk — you can’t lose money
• No fees on most savings accounts
• Predictable — you know exactly what you have

Cons:

• Low interest rates (currently 3-5% on savings accounts)
• Interest is taxable (40% inclusion rate on interest income)
• Inflation eats away at the real value

EasyEquities Money Market Account

Pros:

• Higher interest (currently around 7-8%)
• Still relatively liquid (T+1 or T+2 withdrawal)
• Can stay within your existing platform
• Competitive rates vs banks

Cons:

• Not instant access — takes 1-2 days to withdraw
• Slightly more complexity than a bank account
• Still subject to tax on interest income

EasyEquities ETFs/Unit Trusts

Pros:

• Potential for higher returns long-term
• Can use your TFSA allowance

Cons:

• Can lose money in the short term
• Not suitable for emergency funds — you might need to sell when down
• Takes time to sell and withdraw

For a deeper dive into where to park cash, see our guide to money market funds in South Africa.

My Recommendation for This Situation

You’re earning under R10k net. Every rand matters. Here’s what I’d do:

Phase 1: Build R15k starter fund (months 1-12)

• Pause the R500 ETF investment temporarily
• Keep the R500 TFSA contribution (tax-free is valuable long-term)
• Put R600/month + the paused R500 = R1,100 into a high-interest savings account
• Target: TymeBank GoalSave, Capitec, or Discovery Bank — all offer 5-7% on savings

Need help getting started? Our guide on how to save R10,000 in 6 months shows you the mechanics.

Phase 2: Split approach (months 12-24)

• Once you have R15k emergency fund, reduce contributions to R500/month
• Resume R600/month to ETFs (see our guide on how to buy ETFs in South Africa)
• Continue R500/month to TFSA

Phase 3: Full investing (month 24+)

• Once you have R30k+ emergency fund, stop adding to it
• Max out TFSA (R500/month puts you at R6k/year, well under the R46k annual limit)
• Increase ETF contributions as income grows

What About Using a TFSA for Emergency Funds?

Some people use their TFSA as an emergency fund. The logic: tax-free interest, and you’re not wasting the allowance.

This can work, but there’s a risk: if you withdraw from your TFSA for an emergency, you permanently lose that contribution room. You can’t put it back.

For someone with limited income, I’d rather see your TFSA used for long-term investing (ETFs), not parked in cash earning 7%. Let the tax-free growth compound over decades.

The Boring Answer

For emergency funds, boring is better. A bank savings account or money market account wins because:

1. You can access it immediately when you need it
2. You can’t lose money
3. No complexity or decision fatigue

Yes, the returns are lower than investing. But that’s the point. Emergency funds aren’t investments — they’re insurance.

If you want slightly better returns with minimal extra risk, the EasyEquities Money Market account is fine. But don’t put your emergency fund in ETFs or unit trusts. The one time you need it, the market will be down. That’s how it works.

Bottom Line

1. Pause the non-TFSA ETF investment temporarily
2. Build a R15k emergency fund in a bank savings or money market account
3. Keep contributing R500/month to TFSA
4. Once emergency fund is complete, resume full investing

You’re asking the right questions. Build the foundation first, then invest.