3 Reasons for an Emergency Fund
The final post in our Budgeting Series covers the importance of creating an Emergency Fund as part of your budget.
What is an Emergency Fund?
1 in 3 Brits do not have a £1,500 fund available. An Emergency Fund is absolutely essential to protect you from going into debt and facing financial insecurity. It is a savings pool for unexpected or emergency expenses. Ideally you should about 3-6 months worth of regular living expenses. However, in the beginning, saving around £1000-£1500 is a good start.
Why would I need one?
1) If you only have one source of income
Having only one source of income can be dangerous if you go through an unexpected job loss or illness. However, an emergency fund can help you cover your basic living costs until you can work again.
2) You can be more prepared
An emergency fund can help cover any unexpected bills and overcome any financial challenges. For example, you car might suddenly need repairs, or you might need to travel abroad at the last minute for a family emergency. Without this fund it could be a struggle to pay any sudden, large costs and would increase your risk of going into debt.
3) Helps you practice good money habits
Compiling an Emergency Fund is no easy task, it is not something that happens overnight. However, paying into a fund each week/month helps you build up a good habit of saving. It is an important practice to learn. If you need some budgeting inspo, take a look at our budgeting methods post from last week!
We hope you have enjoyed our Budgeting Series! Our prepaid card app is perfect to help you budget your spending, with a £120 monthly limit to help you stay within your budget - you can download now on iOS in the UK.
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