Whether it’s a broken fridge, new school shoes for the kids, or an emergency plumber, we can’t plan for everything. However, one thing we can do to help our future selves is to start an emergency savings fund.
An emergency fund is a financial safety net that can help to weather any crises life may throw at us when we least expect it. With the cost of living continuing to rise, it’s more important than ever to have a that safety cushion. Having an emergency fund to fall back on could also mean you’re less likely to apply for extra credit such as a loan or a credit card, which could affect your credit rating.
The benefits of an emergency fund don’t end there. Knowing that you have savings to fall back on if you need them can help you to reduce stress and anxiety caused by money worries and improve your overall health and well-being.
How to get started
There’s no one-size-fits-all approach to building an emergency fund. First, you need to work out how much you can afford to save.
The best way to do this is to work out how much money you have left after monthly outgoings, and then decide how much of that you would like to put into your fund. Having a target in mind can help - check out MoneyHelper.co.uk's savings calculator tool to work out how long it will take you to save a set amount.
Saving a little bit at a time is the perfect way to get started. You don't need to be able to put away large sums of money to successfully build an emergency fund. You could try the 1p challenge (where you save 1p on the first day, 2p on the second day, and so on), or use tools like automated savings, standing orders which leave your account on the day you get paid, or ‘round-ups’.
Where to keep your emergency savings
Ideally, you want to strike a balance between earning interest and having quick access to your money, which might require shopping around.
An easy-access savings account, such as our Welcome to Newbury account for new members, or our Existing Members account for current customers, could be a good fit. If you'd like to discuss your needs, you can book a savings review with one of our Qualified Savings Advisers here.
