An emergency fund is money you set aside each month from your budget to pay unexpected expenses.
Unexpected things happen in life and you need to prepare for them before they happen.
Having an amount you set aside for emergency will prevent take unnecessary debt.
How Much Emergency Fund Do You Need?
Starting with one month of your income saved up for emergency fund is a good idea, however, saving at least three month worth of your income is ideal.
Building up your emergency fund can be done slowly saving as little a £20 a month will help you to build your emergency fund.
Why You Need An Emergency Fund
1. Job loss
These days there is no such a thing called job for life like the old days the world is changing.
Reasons, why you are not safe in your current job right now are:
– Companies go bust do you remember Woolworth, JJB sports and MK One where are they now?
– Merger happen
– Companies relocate to new premises or outside the country for cheap labour and other reasons.
– New technology is being developed every day to cut staff numbers e.g. self-service tills, picking robots.
With all these happening jobs are not safe you need to build a safety net that will help you see you through to the next job in case you lose the one you are in right now.
Illness of any kind can strike you or your loved ones at any given moment, which will force you to quit work.
Now if you don’t have any emergency savings this can prove to be a difficult time for yourself and your family.
3. Bigger Than Budgeted Bills
Now a lot of people have mobile contracts, which are paid monthly.
Have you ever gone above your minutes or data monthly allowance?
If you have then you definitely know that this can be a shock because it’s something that you didn’t budget for and in most cases you don’t have the money to pay the bill with.
It’s important to have an emergency fund as it can help you when you least expect the unexpected to happen.
It will help you ease money stress.
Over to you…
Do you have an emergency fund?
What are your reasons for saving your emergency fund?
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