Most People don’t have an Emergency Fund!

• Amanda Gillam
• 7th January, 2019
• Better Budgeting & Saving

It’s so important to put away funds for a rainy day. When household essentials that we take for granted break, need replacing or reach the end of their lives it can be a big financial strain to replace them.

If you were required to replace your existing boiler, you’d be looking at a cost of over £1,000 including fitting. To completely replace your roof, you’d pay in the region of £5,000. For a home rewiring it would set you back £2,750.

For many of us, we simply wouldn’t have the funds set aside to cover these expenses. Too often that means borrowing to make up the shortfall. Whether that takes the shape of credit cards, personal loans, or cash loans, the outcome is the same – money owed and debt accrued.

Put away a just a little every month

We looked at the average cost of replacing essential items and their lifespan to calculate the monthly savings you’d need to accrue to replace them at the end of their lives. It turns out, you would need to save £138.67 per month to cover one replacement for all of your essential household items.

That’s certainly a manageable figure for many households and a better option than plunging yourself into debt. Of course there is no guarantee that each item won’t need replacing in a shorter time frame or that things won’t break consecutively, but £138 is the figure you should try and work towards.

Results of our UK Survey

We also surveyed a portion of the UK population to understand how we’re doing as a nation when it comes to putting away funds for a household emergency.

We saw that 60% of Britons have £1000 or less stored away for this purpose. That isn’t enough for a boiler replacement, meaning many families would be left struggling in winter if anything were to happen to their current heating solution.

More worrying is the fact that 10% of the country have no savings at all in place to help them out with a household emergency.

Just under a quarter of us do, however, have over £5000 in savings. Enough to completely replace your roof if it came to it, or re-wire your home.

Our Question: You’re suddenly faced with the cost of repairing a car or an important household item (e.g. freezer/washing machine). How much money do you already have saved for such an emergency?

Regional UK Differences in amount saved

People in Liverpool seem to be the most prepared for funding an emergency with those in Norwich a close second.

Sheffield:

Manchester:

Bristol:

Liverpool:

Norwich:

Why is an Emergency Fund Important?

Our personal finance expert Amanda Gillam said:

“It’s so important to not be short-term when it comes to your finances. Too often we see people overstretching themselves to use credit for major purchases, meaning that their monthly income goes on paying off debt rather than for savings.

“Whilst saving isn’t always the most exciting thing a person can do with their money, its vital that if people can save that they put something aside for when times are hard. It’s important to consider the consequences of being caught out if something goes wrong at home and a household item needs to be replaced or repaired.

“Whilst borrowing money can help meet these short-term needs, in some cases unplanned borrowing can lead to people getting into financial difficulties over time. By simply putting away a small of money each month people can avoid these potential problems.”

Top tips to help you save

By putting something away every month, you’ll be in the best position to cover yourself in the case of an emergency. The following are essential tips to help you do just that:

• Learn how to budget – calculate your income vs. outgoings and make sure you don’t overspend each month.
• Cut your outgoings where you can – moving to a better deal for your energy bills, taking a packed lunch to work and car sharing for your commute are all great ways to trim your expenses.
• Learn to live within your means – living lean means you know how to get the most out of your food shop without wasting anything, where to get the best deals or the benefits of shopping second hand.
• If you have credit cards, pay them off at the end of every month or keep the balances as low as possible to avoid unnecessary spending on interest.

A rainy day emergency fund should be a reality, not an impossibility.

Related Stories

• Here’s how to create an emergency fund if your income is limited
• How to cover the cost of a domestic emergency
• Money management tips if you’ve lost your job