There’s not much more that can disrupt the smooth-running of family life like when the washing machine breaks down, or the freezer stops working. Beyond repair, replacing a large kitchen appliance or an unexpected fault with the family car can prove costly – and lets face it, who has that much disposable income each month!? Not to mention if, God forbid, there is a period of unemployment to survive.
What Constitutes an Emergency?
Okay, so I think we all recognise that buying that cute pair of shoes you spied in town the other day isn’t an emergency… Nor is forking out for a new television when there was nothing wrong with the last. So what is an emergency?
- Job loss
- Emergency dental work
- Critical motor repairs
- Critical home repairs
- Family member passing away
How Much Do I Need to Save?
How long is a piece of string? Any amount of savings that you can get behind you is fantastic. If you’re starting from scratch, I’d aim for approximately £1000 – but clearly, the more the better. If you lost your job, would £1000 last you long enough before you can find, start in another position and be paid for it? Probably not.
To achieve an emergency fund, a regular amount should be saved from your weekly or monthly income. If you’re living from paycheque to paycheque with no savings, you maybe want to look at where you’re spending that can be cut back. Set up a standing order to go into your savings account on your pay day, and you won’t even know it was there.
Benefits of an Emergency Fund
One huge benefit of having an emergency fund is that you have an amount of money stashed away that can help you through some difficult times. You don’t pay interest on that, as it’s money you’ve already saved – in fact, you can earn interest on your emergency fund and use it to top-up your savings!
Another excellent benefit is some peace-of-mind, knowing that you don’t need to worry about your finances in the case of an emergency. However, if you haven’t quite got enough saved up to pay for that replacement washing machine, there are a number of credit cards, payday loans and bank overdrafts that can pull you through until your next paycheque.
Do you have an emergency fund?
*This is a collaborative post