How to start an emergency fund

 

So you want to get on top of your personal finances? A great place to start is setting up an emergency find. The whole idea of an emergency fund is that it isn’t touched unless you have unforeseen and unexpected payments that your regular bank accounts aren’t going to cover. Unexpected car troubles, emergency vets bills, and having to replace furniture and appliances are all things that fall into this category!

How to Start An Emergency Fund

 

We’ve established that having an emergency fund is a good idea, but how do you actually go about setting one up?

 

The easiest way of setting up your emergency fund is to set aside a certain amount of money every month. Some banks (like Monzo) have an option where you can create a ‘pot’ within your online banking account.  You can then transfer money to and from your ‘pot’ free of charge to set it aside from your main cash flow.

 

Other banks have savings accounts that work well along side your regular current account. Wherever you decide to keep your emergency fund, it’s a good idea to check that there won’t be a charge if you need to withdraw money at any time.

 

Choose an amount of money to transfer into your emergency fund each month, and make sure you stick to it. If you think you might forget to make the transfers then set up a monthly direct debit from your current account into your emergency fund.

 

A popular alternative to keeping an emergency fund topped up via online banking, is to make your fund cash-based! This option isn’t for everyone, but if you often have cash then it might work well. Find somewhere safe and secure to keep your fund, and add to it every month.

 

Emergency funds add up quicker than you might think when you don’t touch them, but they’ll grow even quicker if you make additional payments. Some people like to round up their transactions and pay the difference into their funds. This means that there’s often less than a pound being added to the fund, but because it happens frequently, it adds up! If you’ve got a cash-based fund, add to it when you find change down the sofa or in old pockets!

 

Thanks,

C