More and more people are realising the importance of having an emergency fund. If, you were suddenly unable to work or decide to take an extended break, having funds that will keep you afloat during that time will be extremely valuable.
An emergency fund can also help you if you’re faced with unexpected bills or expenses, such as damage to your home or car. With a little cushion there to help you out, you’ll have peace of mind when it comes to your finances.
So how do you even get started with an emergency fund? Check out the following tips.
Decide what your emergency fund is for
Emergency funds can serve a number of purposes, but they are essentially there to cover you for things your general spending and savings won’t cover you for. It can be used in the event of needing legal help, such as divorce solicitors, and it can be there if you are ever out of work for whatever reason. It should not be used to pay for a holiday, or the next time you want some new clothes. Be strict about what it should be used for to help you build up a sizable amount.
Work out what you need
The next thing you need to do is work out how much you need in your emergency fund. Many people aim to save £1,000, and then continue to add to it. It’s recommended to have savings that could cover your outgoings for at least six months if you suddenly stop earning. Everyone will have a different amount that they want to aim for, and you should try to aim for whatever is realistic and achievable for you.
Put regular amounts aside
Putting regular amounts into your emergency savings pot will help you build it up quickly. If you have a fixed monthly transfer, you should be able to work out when you’ll hit your target. Put in as much as you can afford, while also keeping in mind your other savings and financial commitments. As a large amount of money, it can take you a while to build it up, but try not to lose motivation or give into the temptation to dip into it from time to time.
Find additional ways to save
Finding ways to save money each month can help you free up additional funds to help you reach your target quicker. If you want to build up your emergency fund quicker, you might want to consider getting rid of some of your unnecessary direct debits or things you can live without. You could also try selling some of your unwanted items to give your savings a boost. Starting a side hustle could be another way to build up your fund quickly.
Being able to save in case of emergencies requires discipline, but it’s a great way to become more financially responsible. Get your fund started by working out exactly what you need to feel comfortable in an emergency and start working towards it.