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How to Start an Emergency Fund

How to Start an Emergency Fund

 

You may think that being able to save up an emergency fund would be way too difficult, however much you want one. We all know that have money put aside for emergencies is a great idea but after the bills go out and the food shopping and petrol purchasing are done there is little left for the saving pot.

Having an emergency fund is great for helping you to stay out of debt through being there to use when your pay check isn’t quite going to cover the bills. Using money from your emergency fund will mean you can avoid those annoying late fees and then just pay back into your savings when you get paid. An emergency fund also means that you will be less likely to turn to credit cards or payday loans when something unexpected happens that you need money for, such as fixing the car or replacing a broken appliance.

Instead of looking at saving an emergency fund as a mountain to climb, just start small. The money you save each pay check will add up over time and you have to start somewhere, however small the amount. Then, when the total starts looking good after a few months you will even more motivated to keep adding to it. Setting milestones can help to motivate even further so try thinking of each couple of hundred pounds saved as a target met.

To prevent yourself from missing the money that you are saving it can be a good idea to set up a standing order so that the amount you would like to save goes straight out of your usual account into a savings account after you get paid. If you don’t see the money in your account it can make it less painful to let it go! Another way to do this is to withdraw the money from your bank account straight after you have been paid and stash it away in an envelope or a savings jar. Putting any loose change that you get over the month into a savings jar is a good method of saving too. If it is in your purse or pocket you are more likely to spend it!

If you are lucky enough to receive a bonus, or a tax rebate, put this money straight into your savings. It is money that you would not have included in your budget and therefore it is money you do not need at that particular time. So put it into your savings account for a time when you do really need it instead.

If you have a bit of a takeaway coffee addiction, or can’t help but treat yourself to a magazine or two every week, try to cut back on these luxuries and put the money that you would have spent into your savings instead. It may feel like just a few pounds here and there but once you cutback and start saving instead you will see how quickly those pounds add up.

If you follow these tips you should be able to get your foot firmly on that savings ladder in not time. Also, remember that if you have an emergency you must use your newly saved emergency fund to get yourself out of it. Don’t try to preserve it through using credit cards or payday loans, that is what it is there for!

By Sasha Davison

 

27th March 2014


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