62% of Personal Loans Were for an Unplanned Expense. Build the Buffer Before You Invest

The Number That Explains Almost Everything

Of all the findings in the Old Mutual Savings and Investment Monitor 2026, one line explains more South African financial distress than any other:

62% of people holding any type of personal loan said it was taken out for an unplanned expense.

Not a holiday. Not a lifestyle upgrade. Something broke, someone died, someone got sick, the car failed its roadworthy. The report's breakdown of what loan money actually went toward makes it plain:

Borrowing Is Climbing Fast

The scale of the shift in one year is striking:

• Personal loan holding rose from 54% to 64%
• Loans from mashonisas and micro-lenders rose from 12% to 19%
• Borrowing from friends and family rose from 18% to 28%
• Borrowing from stokvels rose from 11% to 16%
• Store card holding jumped from 61% to 68%

Then there's the coping behaviour that gives the game away. 46% of working South Africans say they move money between accounts, or avoid depositing it, specifically to dodge or delay a debit order. One in five does this regularly. Among 18 to 29 year olds it's 56%.

That is what running without a buffer looks like day to day.

Why This Comes Before Your TFSA

Everything on this site argues for investing early, and the compounding maths genuinely is that powerful. But there is a step before it, and skipping it is how people end up with an investment account and a mashonisa loan at the same time.

Without a buffer, an unplanned expense has to be funded by borrowing. And the cost of that borrowing overwhelms any realistic investment return.

Consider the arithmetic. A diversified equity ETF in a TFSA might return 10% a year over the long run. Against that:

• A store card typically runs above 20% a year
• An unsecured personal loan commonly sits in the 20% to 30% range
• A mashonisa operates far outside the National Credit Act, with rates commonly reported around 30% a month

You cannot invest your way out of that. There is no ETF that beats it. Paying off a 25% debt is a guaranteed, risk-free 25% return, and nothing in the market offers that reliably.

So the order of operations is:

1. A small starter buffer. One month of essential expenses, in cash you can reach.
2. Clear high-interest debt. Anything above roughly 15% a year, worst rate first.
3. Grow the buffer to three months of essential expenses.
4. Then invest in your TFSA, seriously and automatically.

Why Your TFSA Is a Bad Emergency Fund

Here's where people get clever and go wrong. A TFSA is liquid. You can withdraw at any time, no penalty, no notice period. So why not let the TFSA be the emergency fund and skip the low-interest savings account?

Two reasons, and the first is permanent.

You never get the contribution room back. South African TFSA withdrawals do not restore either your annual or your lifetime allowance. Withdraw R40,000 to fix a roof and put it back next year, and you've consumed R80,000 of your R500,000 lifetime limit for R40,000 of actual saving. That room is gone forever. Do this three or four times over a working life and you've quietly destroyed a large fraction of the most valuable tax shelter available to you.

The money might not be there when you need it. If your TFSA is invested in equities, as it should be for a long horizon, its value moves. Emergencies do not politely wait for markets to recover. Selling into a 25% drawdown to pay for a funeral converts a temporary paper loss into a permanent real one.

An emergency fund has exactly two requirements: it must be there, and it must be worth what you think it's worth. A TFSA invested for growth reliably satisfies neither.

Keep them separate. The emergency fund goes in an accessible interest-bearing account, a money market fund, or a notice account you can break. Boring, low return, entirely the point. The TFSA is for money you will not touch for a decade.

The Savings Raid Nobody Plans

The report's preservation numbers show what happens when the buffer doesn't exist:

• 47% dipped into savings to make ends meet in the past year
• 15% cashed in an investment earlier than planned
• 3% paused contributions to their investments entirely

The buffer isn't really an alternative to investing. It's what protects your investing. It's the thing that stands between an unexpected R8,000 expense and either a 30%-a-month loan or a permanent hole in your lifetime TFSA allowance.

Building the Buffer When Money Is Tight

The obvious objection: if there were spare money, there would already be a buffer.

Fair. But the report also shows 73% of working South Africans overspend or spend outside their budget in a typical month, while 62% claim cutting back is their first response when money is tight. The gap between those two numbers is where the buffer comes from.

Some practical moves:

Start smaller than feels serious. R200 a month is R2,400 in a year. That covers a lot of the small emergencies that currently become store card debt.

Automate it on payday. The report's own data on stokvels shows why this works: the top reason people join is built-in discipline, that they know they will not miss a payment. Replicate that mechanism with a debit order dated the day after you're paid.

Put windfalls straight in. Bonus, tax refund, stokvel payout, a good side-hustle month. Send it to the buffer until it's full, then redirect everything to the TFSA.

If you're already dodging debit orders, start there. The 46% moving money around to delay deductions are in an active cash-flow crisis. The step there isn't a buffer, it's the 38% move: approach the creditor and arrange a payment plan. Creditors are considerably more flexible with someone who calls before missing a payment than after.

Don't confuse a stokvel with a buffer. A stokvel pays out on the group's schedule, not on yours. It's a useful savings mechanism and a poor emergency fund, for exactly the same reason as an invested TFSA: the money isn't there on the day the geyser bursts.

The Bottom Line

Sixty-four percent of working South Africans hold a personal loan. Nineteen percent are borrowing from mashonisas. Almost half moved money around this year to dodge a debit order. And 62% of all that borrowing traces back to a single cause: an unplanned expense arriving with no buffer behind it.

An emergency fund is not exciting and it will not make you wealthy. It is the thing that lets everything else work. Without it, one bad month can undo years of investing, either by forcing a 30%-a-month loan or by permanently consuming tax-free room you cannot replace.

Build the buffer. Then invest with confidence, knowing the next unplanned expense won't reach into it.

Your Next Step

1. Work out one month of essential expenses: rent, food, transport, utilities, debt minimums, school fees.
2. Open a separate accessible account for it. Separate from your current account so you don't spend it by accident, and not at home in cash.
3. Automate a transfer for the day after payday, at an amount you can sustain in a bad month.
4. List every debt with its interest rate. Anything above 15% gets cleared before you invest seriously.
5. Grow the buffer to three months, then send everything you can to your TFSA.
6. If you're currently behind on repayments, contact the creditor and arrange a payment plan. Thirty-eight percent of South Africans did this last year, up six points, and it's the single most effective move available before things escalate.

Statistics in this article are from the Old Mutual Savings and Investment Monitor 2026, an annual survey of 1,519 employed South Africans aged 18 to 65 earning R8,000 or more per month, with fieldwork conducted in April 2026. Interest rates cited for credit products are typical market ranges and vary by provider and credit profile. This article is general information and not personal financial advice.