WTF is this blog about?!
- ‘Rona has taught us a lot about money: that investments can fall; that we can save a f*@k tonne when we’re stuck inside; and that it’s super important to have an emergency fund.
- Aside from taking the time to understand what you earn and what you spend, building up an emergency fund is hands down the best thing you can do to get your financial s*!t together 💃
The short answer’s yes; yes you bloody do need one! But before I tell you what to do, let me explain WTF an emergency fund is: in short, it’s a cash buffer of around 3-6 months worth of essential expenses (that’s rent, bills, food etc.) tucked away for emergencies.
What counts as an emergency?
As much as it might feel like it at the time, getting a sale alert email from Christian Louboutin does not count as an emergency (I should really unsubscribe from those tbh). An emergency can be anything from having your hours cut as a result of the pandemic, to having an awful breakup and needing to move out of the flat you share with your toxic ex A$AP Rocky.
Ok I get it, proper emergencies only! Now, how do I save for one?!
3-6 months worth of expenses is a lot, so it’s not something you’re going to save overnight. Instead, you should set aside a certain amount of money each month to slowly build your emergency fund up (try setting up a standing order that comes out of your account each #paydaybaeday). Once you’ve reached your target amount, you can start channelling your money elsewhere – such as to a Stocks & Shares ISA.
Where should I keep my emergency fund?
A true emergency is unexpected – so you want to be able to access your cash easily. At the same time, you don’t want your emergency fund sitting in your current account, ready to be splurged on adrunken Jäger-train.
That’s why I think the best place to keep an emergency fund is in an easy-access savings account or Cash ISA (easy-access means you won’t face a penalty for withdrawing your money). Unlike stashing your cash under the mattress, a savings account or Cash ISA will earn you a decent-ish interest rate on your money (see the Money Saving Expert for a handy list of the best easy-access accounts available rn, which is updated on the reg). Personally, I use Marcus by Goldman Sachs because it was offering the best rates at the time, but you should do your own research obvs.
If ‘Rona has taught us anything, it’s that crazy, unexpected s*!t can happen and we need to be prepared for it. Having an emergency fund is seriously one of the best things you can do to improve your financial sitch (and well-being), and being in semi-quarantine is the perfect opportunity to get started (it’s gonna be a hell of a lot harder to save for when we’re all vaxed up and ready to PARTAYYY).