The past few years have been difficult for us all. We are still experiencing the rippling effect of Brexit, the pandemic, the wider impact of the Russia-Ukraine War, and the cost-of-living crisis.
With a series of unpredictable events, it can be easy for uncertainty to rise and for you to worry about things that are out of our control. However, now’s the time to try focussing on what you can control – like planning ahead and preparing yourself a little better for whatever lies ahead by building an emergency fund. Geraint Davies (Independent Financial Adviser) from The Money Partnership shares more.
What is an emergency fund?
An emergency fund is a separate savings pot that you can access to cover unexpected expenses. Job loss, illness, and surprise bills are a few reasons why having a contingency fund of at least three months of living expenses is recommended. To avoid temptation, you could set up a separate bank.
If you don’t already have an emergency fund, think about putting some money aside each month, even if it’s a small amount. Consistency is key.
“Think of it like an insurance policy. Rather than paying premiums to a company, you’re paying yourself money that you can use at a later date.”
Why do I need an emergency fund?
Aside from financial security, here are some other reasons why you need an emergency fund:
- Storing your emergency money somewhere else will help you to avoid spending it!
- It can help you to avoid making poor financial decisions like racking up a credit card or taking out a loan.
- It can help you feel prepared and less anxious.
How to build an emergency fund
You might not feel like you have any extra money to spare with the cost of living squeezing your household already. But you could try finding other ways to save. For example, cancelling unused subscriptions, switching to providers with better deals or selling things you no longer use. Also, prioritising your spending to see if you can find any gap between your income and outgoings. Slowly, your emergency fund will build.
Summer has gone by in a blink, and so will autumn too. With the cold weather on the way, we’re faced with boilers breaking, car repairs and other unexpected costs. Now is the time to think about how to put yourself in a better position to face such emergencies in the future.
Get in touch
The Money Partnership are an Independent Financial Adviser with 20+ years of experience in helping people achieve financial clarity. We’re here to offer guidance on how you can save, grow and protect your money. We know times are tough but try to stay on top of things so that you can maintain control of your financial situation.
Visit The Money Partnership for a range of financial resources, or contact them today for a no obligation conversation.