According to a 2014 survey, a quarter of Brits have no money set aside for a rainy day and 60% have less than £1,000 saved. Considering how expensive it is just to live (and by this I mean put a roof over your head, eat beans on toast, and pay your Netflix subscription because it’s cheaper than leaving the house and having a social life) is it any wonder so many people are finding it difficult to save?
Living payday to payday might seem almost unavoidable but, as difficult as it may be to break the cycle, it’s important to get your financial shit together and save up a healthy sum of cash in the event of an emergency. Imagine if you lost your job or your car got written off or you dropped your uninsured iPhone in a puddle! The last thing you want is to turn to short term lenders to make ends meet.
Save anything you can. Even if it’s just £10 a week. It’s better than nothing and it’ll gradually mount up - especially if you opt for a high interest current account. Here’s my guide to saving an emergency fund, in case you need help.
Not only can a solid emergency fund protect you from unexpected costs, it can also give you freedom to make life changing choices. Is your boss a massive arsehole? Quit and start a new adventure! Is your best friend going on an around the world trip and you can’t bear to be without them? Pack your suitcase and jump on the next flight to Bangkok!
When it comes to emergency funds, it can be difficult to know how much to save. I guess it all depends on the type of ‘protection’ you want to have. If you want to protect yourself in the event of some kinda technology breakage or household expense, a couple of thousand pounds should do the trick. Job loss, however, could prove much more costly. Let’s imagine you lost your job and it took 5 months to find a new one - you’d need 5 months’ living expenses to hand!
And, in my opinion, if you’re going to make a life-changing decision such as travelling the world on a whim or quitting your job without another one to go to, you need a super healthy wad of cash at the ready. I personally wouldn’t do either of these things without £10,000 saved but that’s just me - others might think differently!
Earlier today I spotted a thread on the Money Saving Expert forums that discussed just how much you should save in your emergency fund. I’ve picked out some of the most insightful comments from MSE forum users but if you’d like to see the post in full you can do here: “How much buffer should you have?”
Some comments have been edited slightly for clarity and I have added some links within the comments to relevant blog posts.
Mrsbee17
“3 months expenses. £1,000 is a great start”
“Long term, it’d be good to get 3 months expenses in case of job loss etc., though I do think £1000 is a great start for any things that pop up (car problems, washing machine bust…). I put £50 a month away as a standard and any extra I get goes in to top it up if necessary. It took me around 6 months to get there as I dipped into it and had a bonus from work so built it back up.”
HappyMJ
“£5,000 - £6,000”
“My figure is £5,000 to £6,000. I don’t feel comfortable when my current account balance drops below that so I keep a balance between those two numbers all the time. How long did that take to save? …about 5 years saving £100 per month. About 5% of my net (take home) income.”
Hermia
“Enough to cover 6 months”
“I would say enough to cover 6 months. It does depend what work you do. If your skills mean you can get plentiful cash-in-hand work than maybe you could get by on less. If you work in a field where police checks are needed or where the recruitment process tends to move slowly than you definitely need a bigger buffer.”
BettyBones
“I put away £50 a month. The balance is currently sitting at just shy of £1,000”
“I put away £50 a month as standard. It’s set up as a standing order from my current account to my savings account so it just gets paid like a bill. I then add odds and bods to it as and when I can. I’ve been doing this since last May and the balance is currently sitting at just shy of £1000. That’s not bad as a start.
“It would probably cover a minor emergency, like unexpected car repairs or the boiler breaking down, but wouldn’t cover me for long if I lost my job.
“When I got my first job (oh so many years ago) my dear old Dad gave me this advice - He said: “If you always keep a box of eggs in the house then you’ve always got a meal and if you always keep 5% of your pay in the bank then you’ve always got enough money to buy the eggs!” I didn’t really understand what he meant back then… but I do now! Oh how I wish I’d got into the habit of saving 5% of my pay each and every month.”
Yorkshirel..
“I have £500 set aside. When I get out of debt I will save like a demon”
“I have £500 set aside which would cover emergencies such as a car bill, new washing machine etc. I just cant see the point in saving any more than that when I have credit card debt. However, when I get out of debt I will save like a demon. I never want to be in this position again.”
Fosterdog
“I prefer around £3,000”
“I don’t like my fund to drop below £2,000. Ideally I prefer around £3,000 with another lump of at least £2,000 in a savings account - not as an emergency fund but more for any treats, days out, holidays etc. But it could be used as an emergency fund if either of us were to be out of work at all.
“We are both incredibly lucky that we both get overtime most weeks, we put away £150 a month from our basic joint wage, get some extra spending money each from our individual overtime pay, and then top up the savings with whatever is left over. Most months we can put an extra £100-£500 away depending on hours worked and extra spending.”
Rogue999
“I have £1,000 stashed”
“Depends on what you class as an emergency - for me that would be a broken boiler/washing machine/etc, for which I have £1000 stashed.
“Job loss obviously much more serious and while we could survive on one salary (just!) we need 2 and I’d be straight down to an agency to get ANY job.”
lumpyspacep
“[Mine] presently stands at £16.03”
“I’ve never been fortunate enough to have an emergency fund / buffer yet. I’m working towards it. Presently stands at £16.03, and it is very much not to be touched! I’m intending to start putting a small amount away per month just to build something up”
SLZ
“I intend to have an emergency fund of £10,000 set up”
“From my recent job loss to finding a new job I realised I had no fund and was in danger within 2 months. For the future I intend to have an emergency fund of £10,000 set up. This should see me through up to 5 months if I lose my job, get sick or something else unexpected happens. Everyone is different as some may be able to get away with £1,000 and others will need £100,000 but for me, £10,000 is ideal I think.”
Chelseablue
“I currently have £11,000 in savings”
“I currently have £11,000 in savings. This would allow me to pay the mortgage for 15 months while looking for another job (partner’s salary could cover everything else). Hoping to get to £15,000 by end of the year.”
MEM62
“I have around six months living costs”
“I have around six months living costs readily available and other assets (S&S ISA) that could be liquidated if I had to survive for longer.”
A4445
“I’m aiming for £4,000 by the end of this year”
“My emergency fund is currently £2,700 I’m aiming for £4,000 by the end of this year. I’d like £6,000.”
FlacosFloozie
“[I have a] £500 buffer”
“When I was in debt just getting a contingency fund of £200 made a difference. It meant unexpected bills could be paid without knocking progress to paying the debt off and that made a huge psychological difference.
“At the moment, I’m working with a £500 buffer as we’re saving heavily for house deposit and move. Once that’s done the aim will be to keep 3 months’ expenses and build up. I’m lucky I work in an industry where unemployment is very unlikely and I have good income protection if I get ill.”
Teacher2
“Save six months net pay for an emergency”
“Pay your debts off first and then save six months net pay for an emergency fund. Keep this in an instant access account and, after that, start proper savings.
“My husband and I have just set up three Santander 123 accounts (two personal and a joint) as, if you keep 20,000 in each account and pay in £500 a month they will pay 3% on the balance plus cashback on direct debits for a £5 a month fee. It beats any savings account around.”
RedGoose
“I’d like to get 6 months’ salary tucked away”
“I’d like to get 6 months’ salary tucked away. At the moment it usually gets to around £2K before “something happens” (car/boiler dying, that sort of thing).
“I tuck away some into an easy access account and some into a regular saving account (for the better interest).
“I know some current accounts pay better interest but I like to compartmentalise my funds a bit more (having savings in a current account would be too tempting for me, whereas to take money out of my savings hurts more).”
