why you need an emergency fund now more than ever

An emergency fund is a separate savings pot that you can access to cover unexpected expenses. Job loss, illness, surprise bills are a few reasons why having this contingency fund of at least 3 months’ living expenses is recommended. However now, with both Brexit and the pandemic having a rippling effect on our economy, an emergency fund is more important than ever.

Energy crisis

With higher demand and limited supply, gas prices have reached record levels. As a result, we can all expect our energy bills to increase. For some it will be soon and others when your fixed deal ends. Although your monthly outgoings will increase, and so it may feel difficult to add more to your savings each month, try getting into a savings habit and save smaller, regular amounts. If you need to review your outgoings and budget so that you can find this extra money, spend a rainy afternoon this Autumn to get it done.

Side note: If your supplier has gone bust, make sure you take your latest readings and wait for Ofgem to appoint you a new provider.  

Cost of food

A backlog of low production has meant grocery prices have increased too – a 5% increase in just one month! Perhaps you’ve noticed whilst wandering the supermarket isles that the shelves aren’t fully stocked and that price tags are looking a little higher. For now, try to be money-savvy: shop with a list, look out for deals, consider where you shop (and keep saving!) 

Fuel crisis

After Brexit, a lot of European drivers returned to their home countries. The pandemic also caused a backlog of HGV driver tests. These were the two main factors responsible for recent fuel shortages. Prices are now at the highest they have been since 2013 and will continue to increase. What can you do?

• Try filling up in places where they offer loyalty points. You might be able to earn money off vouchers/coupons from doing so.

• Consider mapping out your journeys thoughtfully so that you’re not making any wasted trip.

Mortgage interest rates

The Bank of England's base rate is sat at a historic low (0.1%). It has been predicted this will increase to 0.25% in the first quarter of 2022. If this happens, lenders will up their mortgage interest rates too. If you're on a variable rate mortgage or your fixed rate mortgage is coming to an end, you might want to consider opting for a 2- or 5-year fixed rate whilst rates are low. This way you can lock into a deal and prevent your outgoings from increasing substantially.

National insurance contributions

Did you know national insurance will be increasing by 1.25% next April? It might seem like a small percentage, but it still means you will be doing the same amount of work and taking less home. Though we hope you can continue to live within your means, building this emergency fund now, means that you’ll have a pot you can dip into if you really need to.

It’s a good idea to think about a more long-term plan to manage your finances effectively and continue saving for the future. If you need a hand doing so, please don’t hesitate to get in touch. 

Winter’s coming

Lastly, if there couldn’t be anything else, the seasons are changing rapidly. Summer has gone by in a blink and so will Autumn, which means Christmas is on the way and the cold weather too. We’re faced with boilers breaking and car repairs. Plus, Christmas can put a big dent in anyone’s bank account. To avoid debt in January, carefully plan what gifts you’re going to get and compare deals. Buy them over the next few months instead of all at once and stick to your allocated amounts. It might seem like the most difficult time to save more, but if you keep an eye on your figures, prioritise well and continue findings ways you can cut your spending, you should be able to find a bigger gap between your income and expenses.

The events that have occurred over the past few months act as a reminder that anything can change at short notice. It gives us more reason to have an emergency fund ready as a financial safety net.

At The Money Partnership, we're here to offer guidance on how you can save, grow and protect your money. We know times are tough but try to stay on top of things so that you can maintain control of your financial situation.

Get in touch if you would like a friendly chat with an adviser – 01633 987070