how to build an emergency fund

canidothis

WIth finances generally being squeezed so tightly and a personal LBM happening about the horrors of CC debt/interest I was hoping for some advice on how people have built up an emergency fund whilst paying off debt - what little tips can you share? how much do you try and put in an emergency fund each month?

GeorgieFTB

You just have to budget for it, something will go wrong, you're washing machine is bound to blow up the week after you cut up your credit cards, the car will attempt suicide just before it's MOT. That's life...

What you can do is cut down spending in other areas, have a store cupboard challenge, don't buy any food for a week, eat up what you've already got, then put the money you would have spent into your debts instead.

I budget £20 a month by DD, I don't even notice its gone. I try to keep it to about £500, and everytime I 'borrow' from it I then have to make it up, anything over £500 goes into my mortgage.

Hope that helps
Gx

canidothis

so hook or by crook get something in the emergency fund I guess - my store cupboard is empty and we didnt shop for the last week but if I had put the food money into an emergency fund I would have been even more overdrawn:cool:

RAS

Hi

What is the emergency fund for?

One of the repeated issues raised here is about using savings to pay debt. One of the bigger issues is that people do not differentiate between budgetting properly for occasional foreseable expenditure like Christmas and car repairs and savings (even if the budgetting fund is held in an instant access savings account).

You need to work out how much you actually spent on "emergencies" last year and divide by 12, then make that provision if possible.

Bear in mind that a good many things cost less if you can pay them annually rather than daily, weekly or monthly, and it pays to try and slowly transfer insurance, car tax, and travel costs to annual payments supported by regular "savings".

Then think laterally about how you might be able to deal with some emergencies. if you think the washing machine is on its last legs, start looking in freegle or freecycle now rahter than wait for the inevitable.

Chrisblue1962

I partially agree with RAS that it would be nice to pay somethings annually and this may be a medium to long term goal for most if not all of us.

However, back in the real world.. I think a short-term goal of £50.00 "rainy day fund" which can be accessed quickly as an absolute emergency is advisable - think of it as your own overdraft fund.

In the big scheme of things, £50.00 is not going to dent your overall debts that much but not having £50.00 could have much larger implications, such as bank charges, failed DDs, having to access other expensive credit options, such as Payday loans :mad: , etc

Other larger emergencies could be put on a credit card that is being repaid or has been repaid and is only used for larger emergencies such car breaks down, hoover blows up, etc


Rainy Day Fund...

• Only use it for ABSOLUTE emergency - pizza and beer are NOT emergencies!
• Make a rule that any monies drawn out must be repaid within TWO months
• If you find you draw on the Fund more than once within, say six months, then you need to re-calculate your budget...or you've just been unlucky

By building up just a pound or two each month will provide a modest but valuable source of energency funding

dancingfairy

I guess you could do it the old style way - you set a budget for food say and then anything left over goes into the emergency fund - maybe you got a bogof or you had a coupon.
Same with everything else I guess - every last pound that's free goes into the emergency fund.
I think there was a thread about it - perhaps on the old style moneysaving board called 'pin money challenge' or something similar?
d

angelflower_2

i put a sum of money into my works credit union, it comes straight off my salary so I dont even miss it. It takes me about two weeks to cash it so I dont dip into it unnecessarily and it builds up quicker than you realise. In fact this year, I may even get a holiday out of it!!

Tupperware_Queen

Like Angelflower, I have set up a credit union account, and put money aside each month for the annual bills - worked out how much I would need till the next time the bill was due - eg car tax, had 4 months left, so put £30 a month. When I pay that, (end of April) I will then only 'need' to put away £10, but I have been managing the last few months to put away the £30, so I will carry on, and the extra £20 can start to build up for emergency funds. The credit union will make cheques out for you to pay the bills, so you don't even get the cash in your hand, so no temptation to spend it on anything else!!

As it takes a minimum of 7 days to access cash from the CU I have set up my own little reserve which I keep hidden at home, only £50, but would be a lifesaver in an emergency. Towards the end of last month I had to dip into it, but made sure I put it back straight away.

Mothermercury30

All great tips- thank you!

I often give this thought myself- last year the gearbox failed on the car, and cost me 500 quid, it was awful.

I think the idea is that it's NOT savings-it's money specifically designed for an emergency. Getting to work by other means is not an option for me- I work in the middle of nowhere, with no carshare opps, and without the car I'm well, stuffed. I HAD to find that money.

There's always a few spare notes at the end of the month- whilst I agree that most of the money should be used to pay off the debt, you also need, in my opinion, to be able to put your hands on about £500 (But of course, this will differ between person to person).

I haven't got that yet, but it's what I'm aiming towards. No more than that, mind- it's just emergency money.

IHaveNoMoney.com

I havent got any thing set aside for an emergency fund but have decided to have my £80 child benefit put into a seperate account each month this can be there to cover emergencys, birthdays, xmas etc Havent started yet but thats the plan starting begining may

canidothis

You've all given me some great ideas, my emergency fund would be for dire things going wrong eg unexpected car repairs, or fridge giving up on me. Ive set up online savings accounts for mot & tax, xmas & birthdays, entertainment (dont do much of that ) and emergency - but each month is so so tight Im just not sure where the emergency money can come from! However tonights shopping came in at £10 under budget :T So maybe thats my first tenner? or does it go to the CC - its a dilema xx