Whether it’s for your next holiday or house, a new car or clothes; setting yourself a savings goal is not only empowering and motivating, but a great way to stay on track financially, too.
But before you start putting money aside for anything else, there's one type of pot you’ll want to have covered: an emergency fund.
What is an emergency fund?
It’s the money you have tucked away that can be ready at short notice. An emergency fund is there to help you pay for any unforeseen expenses, from your boiler breaking down to car failing its MOT — right through to keeping you covered if you become unemployed.
How much should be in your emergency fund?
It’s generally agreed that you should be able to cover three to six months’ worth of essential expenses, including your mortgage or rent, bills, food, pet care, and transport.
If those numbers seem huge to you, then don’t worry, because having a month’s worth – or even just a few hundred pounds – tucked away could help you to get out of a financial scrape!
How do you build one?
Plan — Figure out how much you want to have in your savings by calculating your expenses.
Save — Start by making smaller, short-term, and achievable goals. For example, you could set a goal to put away £100 a month, letting you gradually build up your savings.
Monitor – It’s a good idea to keep track of your savings, as this is where you could think about adjusting how much you put in to align with your goal and factor in other life events. Once you’ve achieved your goal, you may want to look at putting any excess savings elsewhere.
Wealthify does not provide financial advice. Please seek financial advice if you are unsure about investing.
