Do you ever find that it never rains, but it pours? That is exactly our situation right now. Not only do we have an expensive month with my birthday, dentist appointments and so much more, but now Tony has been signed off work for at least a week with an injury. I say at least a week, but speaking to some nurse friends and Dr Google, it seems that it may take weeks or even months before he is fit enough to go back to work.
And with all of that in mind, I am extremely grateful for 1. “free” council tax months and 2. our emergency savings account.
We started our emergency savings account when we first moved in together, over two years ago. Some months we have only been able to put as little as £20 into it, but its existence has helped us out tremendously with unexpected vet's bills, broken appliances and now sickness.
How much should you save
Don't be put off by the high figures, such as needing 6 month's worth of income saved. For most of us, that is an unattainable goal. The most important thing is to actually make a start and save anything you can afford to – even if it is just £10-£20 a month. At the moment, we are only putting away £70 a month – with saving for our wedding and honeymoon we just cannot put any more aside. Without any emergencies popping up, that is still £840 saved at the end of the year. Certainly not a month's income for either of us, but it is something.
How to save
Our emergency fund is a savings account attached to our joint account. It is instant access, which means that they money is available to us immediately. We don't have a good interest rate on it because the most important factor for us is that the money is kept away from our day to day current accounts. We can see the account when we log into mobile banking and transfer money if needed, but it isn't in our current accounts to be accidentally spent. You can set up your emergency fund in an e-savings account (which you apply for through your bank's online banking), an ISA, a normal savings account, a regular savings account or even cash if you so wish. The important thing is to have a means of saving.
Pro tip: Once you have saved into your emergency fund you can look at stocks & shares ISAs.
Pay it automatically
Set up a standing order to pay an amount into your emergency fund automatically every month, soon after pay day. Waiting until the end of the month to “see what's left over” to save means that there won't be much left. Treating it like a bill means you are more likely to save successfully.
Define what an emergency is
Chinese takeaway on a Friday night is probably not an emergency. I am not here to tell you what an emergency is or isn't – we have used our emergency fund for some things that others would definitely not consider an emergency. But don't get into the habit of dipping into it when you are a bit short before pay day. Try to forget it exists until you really need it.
Even though it is a really stressful time for us right now, I can relax a little bit knowing that we will be able to keep our heads above the water without resorting to getting into debt.