Having a healthy emergency fund built up can help cushion any financial blows that you might face during turbulent times.
We found that 52% of people couldn’t live on their emergency savings for more than three months and 27% would be unable to support themselves for more than one month if they lost their job.1 Even if the thought of saving right now feels out of the question – know that any steps you can take (however small) could help bring you some peace of mind.
Here are some tips to get started or give your current emergency fund a boost, so that you can be on the road to creating a stronger financial safety net.
Step 1: Set a clear target
Before you go straight to putting aside any spare money you have, take a little bit of time upfront to work out how much you want to save, by when and what for. Then write it down somewhere that you can easily see it to keep you motivated. For example, 'I want to have saved £1,000 by March to be prepared for any future expenditure increases’.
To hit that goal, you could then set up a monthly standing order into an easy-access savings account (more on that in step 2).
Remember to tailor whatever amount you choose to your own personal circumstances so that you’re not going into debt to save or stopping paying bills. As cost of living pressures continue, you might need to adjust your original goal. Already gone over your budget and found that it’s not possible to save anything? Try not to be disheartened. You could always use these tips for when you’re in a better position to do so.
Step 2: Work out where you’ll save your fund
In the case of an emergency, it’s important that you can access your money easily. When you’re looking at what type of saving account to open (or what you already have) bear this in mind.
Easy-access savings accounts typically let you add to them whenever you want (which can be ideal for habit building) and let you withdraw the funds at any time.
Pay attention to the rate offered, check that it meets your expectations and look around for the best deals – the tax treatment or rate of interest payable often depends on your individual circumstances.
With inflation currently running at a higher rate than the interest rate most savings accounts are able to offer, it could be difficult to secure an inflation-beating return. If you’re unsure about anything – speak to the provider to get more information before making any decisions.
Step 3: Start saving by looking for quick ways to cut costs and make money
If you need to focus on adding to your pot, maintaining it, or are starting an emergency savings fund from scratch, here are a few things you could try:
Review your spending in detail again
Go through your bank statements to see exactly what you’re spending your money on and where you could make some cutbacks.
Set a budget and stick to it, look to prioritise saving where possible as well
Not sure how to start? Our article on budgeting methods could help.
Cancel unused subscriptions
Make sure you really will benefit if you choose to do this – there’s no point in cancelling everything if you still enjoy the service, because it’s important to still find the joy in life. Our financial wellbeing index explores how you should keep in mind what brings you joy and purpose whilst managing your finances.
Sell old books, clothing and homeware online
eBay is likely to be the go-to for many, but there are plenty of smaller, newer second-hand outlets too. For clothing, these include Vinted, Depop and Thrift+, or perhaps Vestiaire Collective if you’ve got high-end vintage pieces you’re looking to sell.
Put a ban on spending for 2-3 days each week
You could consider putting the money you would have spent into a dedicated savings account.
Use store credits or loyalty points to pay for essentials for the month
You might be surprised how much you have saved up.
Pay bills on time to avoid fees/interest
Pay particular attention to any mortgage or credit payments, as missing these could not only mean you pay more due to extra fees but could damage your credit rating too. If you’re struggling to meet payments on time, talk to your provider.
Pay in what you earn from any side hustles
Side hustles have become even more popular – with people putting their skills and passions to use. If you’re thinking of starting your own side business, make sure to check with your employer if this is permitted within your contract. Be aware that any additional income can have tax implications too. You can find out more by reading 5 easy side hustles to boost your income.
Be more sustainable
Instead of using products only once, you can rent items, refurbish or upcycle and recycle – whilst potentially making some money on the side. Read our article, What is the circular economy and how can it save you money? to find out more.
Step 4: Remember your retirement
It might currently feel like a stretch to save towards your retirement but keeping the long term in mind is important to make sure you have a sufficient income for when you come to retire. Good financial wellbeing balances your short and long-term needs. Before you think about reducing or pause paying into your pension, read our article on the potential impact first.
Step 5: Know where to turn ‘just in case’
If you’ve been trying to build an emergency fund but find yourself in financial difficulty especially during these challenging times – know that you’re not alone and there are resources out there to help. Whether its energy, food, pensions, or budgeting that’s on your mind, How and where to get help with the cost of living crisis details where you can turn to for extra support.