No emergency savings? How much should you have and why?

Posted on by Keith Roseburgh

Research from ING shows that 27% of people are at risk of falling into financial difficulties, as they have no savings to fall back on if something goes wrong.

It’s easy to think that it won’t happen to you, but as LV’s Risk Reality calculator shows, you may be more likely to need time off work than you think.

In fact, every day in the UK, there are an average of:

Why worry about it?

If you need an extra push to motivate you into putting together a financial safety net, think of your loved ones and what they would face if you were suddenly unable to work due to illness, or, even worse, you die unexpectedly.

In addition to the emotional toll, could your family, partners and children cope with the financial fallout of those circumstances?

Office for National Statistics (ONS) data shows that the average weekly living costs for UK families totals ÂŁ554.20. That includes:

  • Bills
  • Food
  • Clothes
  • Travel
  • Recreation
  • Entertainment
  • Education

That means that the average family needs to maintain a monthly income of more than ÂŁ2,216.80.

According to research from SunLife, the average cost of dying has risen to ÂŁ8,905. That includes an average funeral cost of ÂŁ4,078 (ÂŁ5,951 in London). (Source: SunLife)

Is that money readily available, should the worst happen?

How much should you have?

The answer will be different for everyone. A good start is making sure that you have enough to pay your living costs for six months, with some left over for unexpected costs such as:

  • Equipment
  • Care
  • Rehabilitation
  • Changes to your property
  • Travel to appointments
  • Medication

How can you get there?

The path to financial security is different for everyone, you may have inheritance and savings that you wish to use as a foundation, or you might have to rely on making small contributions every month to build it up. Whatever your circumstances, these hints and tips should help you to protect your family, should the unexpected become reality:

1. Location

Make sure that your money is in a place where you can get to it instantly. Whether that’s a current account or easy-access ISA. Keep this separate from your everyday accounts, so that you don’t get the two mixed up. It is possible to place nicknames on different accounts with some banks and building societies, to identify which is which, with ease.

You should keep different types of emergency savings in the most suitable accounts. The first three month’s expenses may need to be ready to go within minutes, so the interest rate is not as much of a priority, as being able to access the funds.

Anything beyond that could be held in an account which provides better returns. Even if you cannot access that capital instantly, you will have time to start the process whilst relying on your other savings.

2. Don’t dip into it

Your emergency fund should be easy to access in the right circumstances, but you should never use that as an excuse to ‘borrow’ funds from it. Whilst it is easy to think that you can replace the money you spend today, you never know when a real emergency will arise. So, it is best to leave the funds alone.

3. Make affordable contributions

If you are just starting to build your emergency fund, it can be easy to be over enthusiastic and leave yourself in financial danger in the short term. However, if you do not usually have a lot of expendable income each month, that could leave you in a worse position in the short term.

The key is to create a budget and analyse what you could afford to cut back on, or if there are any areas where you could be paying less (energy and TV providers, for example).

4. Insurance

The monthly premiums on insurance are a small price to pay in return for the peace of mind that comes with knowing that your family and loved ones will be financially stable in an emergency.

There are three types of insurance you should consider as priorities:

Life Insurance: Pays a lump sum or income to your loved ones if you die within the terms of the policy

Critical Illness Cover: Pays a lump sum or income if you are diagnosed with a serious illness

Income Protection: Pays a proportion of your usual income to your family if you are unable to work through illness, injury or death

Once you have these personal plans in place, it may be an idea to review external policies, including:

Pet: your furry (or scaly) friends can have emergencies, too! And, vet bills can soon become very expensive.

Home and contents: If your emergency surrounds your property or belongings, this insurance provides peace of mind that you can afford to replace and repair, without putting yourself into financial difficulty.

If you are looking for guidance and help with starting and maintaining your emergency fund, we’d be happy to help.

When I retired in May 2015, I approached Keith for guidance on pension planning as I had 5 pension policies that required to be merged into one pot. Keith gave good, clear and sensible advice in a professional and friendly manner; this was just what I needed to ensure that I had my future and that of my family safeguarded. Tom Dalkeith
An acquisition of capital through inheritance created a need for professional investment advice and management. After creating a suitable plan to suit my desired aspirations and risk level, over the past 18 years, Keith has constantly monitored the portfolio to my entire satisfaction, achieving the programme’s aims. Such conscientiousness and integrity have enabled me to recommend him to others who have been similarly satisfied. Mary Edinburgh
My wife and I were looking to arrange finance for a project. We wanted to know if it was possible to raise finance in the UK to buy a property in Spain. After hours of searching online, we settled on arranging a meeting with Keith. He was knowledgeable, friendly and helpful. Keith was able to recommend not only product which exceeded our budget expectations, but he was also able to put us in touch with a lawyer who could help to make it all happen. We now have our dream home in the sun thanks to Keith, and we have continued to rely on him ever since. Kenny Telfer BSc (Hons) MRICS
Keith has provided his services to me since I retired some years ago. I have much appreciated his knowledge and interpretation of what can sometimes be bewildering financial matters. In particular, his meticulous preparation and delivery of information in a clear and concise manner has been of great benefit in our deliberations. I would have no hesitation in recommending his services. Jim Pettigrew
Reaching the age of 55, I needed help to sort out my pension; I contacted Keith through Unbiased.co.uk for financial advice. Keith then came to see me and guided me in detail about my future, finances, savings, etc. I found Keith very informative. I had pensions in multiple pots, and he explained the best options for me. His knowledge and expertise guided me to make the correct decisions for my future. He dealt with everything with ease. Personally, I could not have done this process without him. He has helped me reduce my debt, increase my savings and I look forward to working with him to reduce my mortgage. Yvonne Scott
We approached Keith because we discovered that our investments were no longer being handled in the way we expected, we had various pensions too and a couple of frozen ones. Keith came up with a plan that suited us both and gave us a bit of cash to spend. His approach was both friendly and professional and took place at our home at a time that was convenient for us, I wouldn’t hesitate to recommend his professional advice and services. Graeme & Laura Ferguson

Request a callback

We'd love to hear from you, either call us on 0131 549 9555 or complete the form below