In the midst of a crisis, having an emergency fund in place could make a world of difference. But as recent research has shown, the coronavirus outbreak has not only created a health emergency for the UK. For many Britons, it has become a financial emergency as well.
Since the pandemic started, many jobs in the UK have been furloughed, with many employees receiving less than their usual wages. While things will eventually return to normal, those with no savings may well be finding themselves in a very difficult position.
How Brits are faring during the pandemic
According to a recent survey by budgeting fintech bank thinkmoney.co.uk, half of all the Brits surveyed claimed they had no savings whatsoever before the outbreak of coronavirus.
Of those who had savings, a staggering 46% had to rely, at least partially, on them this year because of issues related to coronavirus. About 12% of those who dipped into their savings spent all the money they had saved up. People aged 65 or older were more likely to have spent all their savings than younger age groups.
Other findings from the survey showed:
- 1 in 10 (10%) Brits have spent between 50% and 75% of their savings during the crisis
- 6% have spent 25% of their savings
- 18% have spent 10% of their savings
Why savings are so important
According to thinkmoney, 4% of Brits have been forced to borrow money in the form of credit or loans to get through the pandemic. This will potentially lead to further financial struggles down the line. Borrowers now have a monthly repayment towards the debt on top of any existing money issues that might continue.
Savings are an important part of dealing with life’s unexpected events. They can help not only with the current pandemic, but also with a job loss, moving expenses or a large veterinary bill.
According to The Money Advice Service, saving money on a regular basis can help you get into a healthy pattern, especially if you automate your savings. You can do this by setting up an automatic transfer to your savings account on every payday.
Saving regularly is more important than how much you save. Even small amounts add up over time and will help you grow your emergency fund.
How to start an emergency fund
If you don’t have an emergency fund, make it a goal to start putting money aside on a regular basis. Don’t wait until you earn more to save – it’s possible to save on a low income. You’ll just have to make small changes in your spending habits and find ways to cut unnecessary expenses out of your life.
While any saving is better than nothing, financial experts recommend putting aside at least three months’ worth of salary to cover unexpected expenses.
Simple ways you can start saving towards your emergency fund include cancelling ongoing memberships or subscriptions you don’t use, putting spare £1 or £2 coins into a jar, and setting up a budget to understand where your money is going and how you can cut down on expenses.
You could also try signing up for supermarket loyalty cards, trying to find cheaper insurance and renegotiating your phone contract.
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