Everything is awesome. Until it isn't.
No matter how secure you feel, it's always best to expect the unexpected. #YellowHammer your life.
So how do you prepare for the worst-case-scenario? And more importantly, how do you prepare for the worth-case-scenario on a budget?
We asked a handful of millennials how much they think is the right amount to have in an emergency fund and what they currently do to protect themselves.
How much should I have in my emergency fund?
Dani 32: I call it a ‘f-off fund’ and I would say 9K is enough. It’s an amount that if you wanted to leave your job tomorrow, you could. You’d have about 3 months of mortgage covered and time to get a new job without a fit.
Alex 25: As I currently don’t have an emergency fund, personally I’d like to have a grand tucked away incase something goes wrong. I think £1000 would be a good safety net to start with.
Because of my impulse spending, if I had anymore I think I would just spend it all on things I want in the moment rather than keep it for what I might need in the future.
Sam 31: I would say 2-3 months income as you never know what could happen. Having this amount of money would make me feel secure as it means I can be out of work for this period of time and still afford to pay all my bills.
Sue 28: I think £10,000 in the bank is the number I need to make me feel secure.
Sarah 23: I do not save money as any spare money I have I put into my mortgage. I have a credit card which, I would say, is my emergency fund. I have more than this available on my credit card but I would say an emergency fund of £500 would suffice as I believe nothing in an emergency would require more than this.
What Are People Most Worried About?
From the sample of opinions above, you can see that losing a job is the biggest concern.
With the uncertainty of Brexit causing 243,702 job losses already and counting, there’s an expected annual wages loss of £6,988,642,254 in total.
Every day a different high-street store announces it is closing down. And with big corporations such as Tesco, Ford and Aviva making the news with job cuts, the fear is absolutely justifiable.
What To Do If You Don’t Have An Emergency Fund?
One in three Brits have under £1500 in savings. 15% of the UK have no savings at all. So when disaster strikes, many of us aren’t prepared financially.
If you don’t have anything saved away in case of an emergency, there are ways you can afford various unexpected expenses - via a credit card, overdraft or loan.
Many of these options come at a price. Credit cards have an average APR of 19.9%. Short-term loans often carry a hefty interest rate. Using these means will cost you a lot more in the long run.
If you’re worried about high-interest rates and charges eating into your monthly pay-cheque, look for low interest lending options. Peer-to-peer lending platforms are able to offer comparatively low rates. Use our loan calculator and get a quote to see how much you could save compared to payday loans.
How Much Is Enough For Your Emergency Fund?
There is no right answer to this question. Only you know what will make you feel comfortable. But we can all agree that having some emergency money is important.
Money advice service quotes three months wages as the appropriate amount to have saved away. Ultimately, it’s down to what you can afford - and what you can afford to make up for if something does go wrong.
Preparing for unexpected expenses ahead of time can save the stress, worry and panic when you suddenly have to find an extra £500 because the washing machine has broken.
Why Should You Have An Emergency Fund?
There are many different reasons why having an emergency fund is a good idea:
- To stop you from adding to or going into debt when something goes wrong
- To support you if your only means of income stops
- To pay for emergency travel if you live far from friends and family
- To deal with repairs and maintenance if you own your own home
- To stop you dipping into your savings
So, how much do you think you should have as an emergency fund? What number would realistically make you feel comfortable and that you have a reasonable safety net?