The situation we currently find ourselves in highlights the unpredictability of life. One moment, we’re plodding along normally, and the next, we’re staying at home for the foreseeable future glued to the news headlines. Although we have never faced anything like the coronavirus before, life can throw curveballs when you least expect them, and this is why having an emergency fund is crucial. If you’re looking to save more, here are some tips to help you set up a new pot and some common reasons why you may need to dip into it.
Why every family needs an emergency fund
Even if you’re a diligent spender, and you keep an eye on where your cash goes, it’s wise to have an emergency fund available. There are several reasons why you might find yourself in a situation where you need money quickly or you’re short on cash flow. These include:
Car repairs
Every driver dreads hearing squeaking or crunching noises. These tell-tale signs usually indicate that a hefty bill is coming. If your car isn’t running properly, you need a new set of tyres, or there are issues with the brakes, the clutch or the gearbox, you could be looking at spending hundreds, even thousands of pounds. With auto repairs, it’s also not usually possible to delay or defer a trip to the garage, as the situation will only get worse with time.
Pet bills
According to the RSPCA, around 12 million UK households have a pet. The vast majority of owners see their pets as members of the family, and when a furry or feathered friend falls ill, there’s nothing worse. Even if you have insurance for your cat or dog, vet bills can be expensive, especially in cases where surgery is required or your pet has a chronic health condition that requires ongoing treatment. If you don’t already have insurance, it’s wise to use the Internet to compare policies and prices. Having a policy could help to cover the bulk of the cost if your pet does need treatment out of the blue.
Broken boiler
We’ve all been there. It’s freezing cold outside, and the boiler decides that it’s throwing in the towel. Nobody wants to put on twenty layers of clothing just to make a cup of tea in the morning or contemplate not having hot water for a shower at the end of a busy day. It is possible to carry out repairs in many cases, but if the boiler is old, it may make sense to get an idea of new boiler cost so that you can weigh up your options. Replacing a boiler isn’t cheap, and having heating and hot water is essential, especially in the winter months. If you don’t already have boiler cover, and you’re worried about being able to afford a large bill, it’s worth investigating plans.
Home renovation and repair
As a homeowner, you often face unexpected bills, and you might feel like your to-do list is endless. When you rent a property, you can call your landlord if the washing machine is broken, the paint has chipped off the front of the house or the gutters are damaged.
When you own a home, you are responsible for upkeep and repair costs. Jobs like fixing the roof, tending to damp patches and replacing appliances can be expensive. You might also find that you want to make improvements to your home to spruce up the decor or modernise the layout. Renovations and redecorating cost money, and it’s always beneficial to have savings available to cover these costs.
Losing your job
Many of us have a stable, steady income. If your job is secure, you might not have even thought about the possibility of losing your salary, but nobody really knows what the future holds. You could lose your job or you might find yourself in a situation where you’re unable to work due to illness or a commitment to looking after relatives, for example. If you do have a job now, start putting money away every month. If you have savings, this will help to tide you over if your circumstances change.
Tips for setting up an emergency fund
If you don’t already have an emergency fund for your household, now is the time to start saving. Before you decide on a figure or target, have a good look at your monthly budget. Analyse spending, and work out how much disposable income you have. Go through your outgoings and circle any that you feel you could reduce.
If you’re spending too much on food, for example, or you have subscriptions you don’t need or want, make cutbacks in these areas. Once you have an idea of how much money is left over, allocate a weekly spending limit and set up a direct debit from your current account to your new savings pot. It’s always a good idea to make that payment on payday.
You can try and boost your savings balance by reducing household bills and decreasing spending. Try and cut out luxury items, for example, buying lunch from a cafe every day instead of making a sandwich, salad or wrap and taking it to work with you, and compare prices when renewing insurance policies or TV and broadband contracts and changing your energy tariff. Cancel memberships and subscriptions you don’t use, and sign up for discount sites to save on family days out, socialising and shopping.
If you have an account that offers you the chance to round up payments and save the difference, opt for this feature. Every little helps, and you’ll be adding to your fund every time you use your card. You might be surprised at how much you could save just by employing these simple strategies.
If we have learned anything from the coronavirus pandemic, it’s that nobody can predict the future. Even if you have a stable job and a good salary, you might find yourself needing money unexpectedly further down the line. It’s incredibly beneficial to start putting cash aside on a regular basis and setting up an emergency fund you can dip into if you have a bill to pay, your income drops or you need to get your car fixed. You’ll be able to cover all your normal household outgoings, and you can minimise stress too.
*Collaborative post*
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