How can I save £1,000 emergency fund? Here are some tips to help you get started.
Life isn’t always sweet. Bad things happen. You could lose your job; your car might die or the boiler might freeze up. And if you don’t have a financial buffer to fall back on it can make a bad situation worse.
It’s a fact that most Brits do not have the extra means to deal with the unexpected. A survey by Money Advice Service found that nearly half of British adults do not have more than £500 in savings.
Do you feel a surge of panic when you think about things going wrong and not being able to pay for it? It’s not surprising most of us have had this feeling at some point recently. We live day-to-day, earnings have been sluggish since the 2008 financial crash and savings rates are pitiful.
Building an emergency fund or ‘rainy day pot’ out of meagre budgets seems to be in the realm of fantasy for most Brits.
But having some sort of emergency fund is a necessity in the fight against debt. If something goes wrong what would most of us do to survive? Answer: Borrow. Sadly, this short-term solution can lead to yet more strain on our creaking bank accounts.
So, if we could manage it, how much should an emergency fund be? Step Change charity has estimated that if every household in the UK had £1,000 saved, it would reduce the number falling into problem debt by half-a-million.
Many have gone further, money saving expert Martin Lewis has said that an emergency fund should cover ‘six months’ of bills’ or even six months’ of wages.
Now, six months’ worth of wages for someone on the average British wage of £26,500 (£21,187 after tax) is going to be £10,593. Saving this amount would be tough-going for a lot of us.
But what if you could build up a realistic £1,000 emergency fund quickly?
That’s the sort of challenge we like here at Money Nuggets. So I’ve put together some ways you can make your emergency fund a reality…FAST.
7 Tips to Build an Emergency Fund Quickly
1. Set Your Target
To start with you need to set a realistic target for your fund. NS&I have found that people who set a savings goal save faster and up to £550 per year more than those who don’t.
If money is tight, or you have debts you are paying off – start small. A goal of £1,000 is good enough and in six months – that’s £166 per month. Or how about a fiver a day?
Doesn’t sound much but it would add up to around £900 in six months. Make a decision and stick to it.
2. Create a Budget and Make Adjustments
You’ve decided on your goal. Now is the time to look at your finances. How much do you pay out each month compared to your incomings?
Set this all down on a spreadsheet and you will soon see where you can make cuts.
The key to being successful at building an emergency fund is create a realistic spending plan you can stick to. Having a plan for your money is crucial to building up your savings.
Most of us don’t have spare cash lying about – saving usually means making a sacrifice on something else. What can you cut from your spending?
A daily shop-bought sandwich? A gym membership? A Netflix or Sky subscription? Re-direct the amount you save straight into your fund.
When I started building my emergency fund, I made a budget and tracked my spending.
After seeing where I could cut costs, I committed to saving £100 every paycheck and set up a direct deposit into my savings account for that.
Since it was automated, I made it work with whatever I had left, but thist step is definitely important.
I realized I needed a set budget for all of my bills plus a spending budget if I didn’t want to dip into my savings.
If you really can’t make a cut, set aside a small amount each paycheck and increase the amount overtime until you hit my goal
3. Make Your Savings Automatic
Set up a new savings account with a different bank. Then set up a monthly standing order to this account for the amount you want to save.
If you have to physically transfer the cash each month you may forget, or decide to spend it on something else. If you set up a standing order on the day your wage goes in, you won’t even notice it going out.
This is key to success. I kept my emergency fund in a separate savings account that takes one business day to pull from, so I am less tempted to dip into it or make a quick transfer.
4. Sell Something
In today’s materialistic age, there is always something you can sell, even if you don’t know it. Scour your house and eBay anything you don’t use. Old phones, computers, books and DVDs can all make money as well.
Old iPods and Apple goods are especially popular at the moment and you’ll be surprised at how much money your old stuff can make. Once liquidated – put any cash you make straight into your fund.
5. Make Extra Cash
There are thousands of ways to make extra money on top of your job. From selling things you own/make to doing a bit of freelancing on the side.
Check out our article ‘Easy Ways to Make Money on the Sidefor some handy hints. Remember, be disciplined and put any extra earnings in your fund.
Have a Savings Jar
It’s amazing how much spare change we all carry around. The average household has £50 of loose change knocking around so check under the sofa cushions!
Make a pact with yourself to put all your coins into a savings jar. It can really build up over six months.
Keep the Habit
If you hit your target in six months – give yourself a huge pat on the back. But don’t stop there! Keep adding to your fund.
Once you’ve caught the savings bug it’s easy just to carry on. And most importantly – remember an emergency fund is just that. It’s not for holidays or fun things. Sounds boring but on the day you really, really need it you will breathe a sigh of relief for all your hard work.
Over to you! Have you successfully built an Emergency Fund? How did you do it? Do you have any of your own tips to share with us? We’d love to hear from you.
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