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I’m sure you are reading that title and thinking this is obvious and you would be right. There is nothing quite like a global pandemic of epic proportions to make most people realize how lucky they were to have an emergency fund.
Some people were not quite so lucky and had no savings or emergency funds and then were made redundant from their jobs and others have lost loved ones due to the virus and now have added expenses they have no idea how to cover.
All in all, it has been a pretty bad year for nearly everyone. Some people have been affected worse than others but everyone across the world has felt the impact of the global pandemic.
Hopefully, we are all managing to somehow make our way through all of this and will come out of the other side.
So what is an Emergency Fund? How much should you have in your Emergency Fund and also where should you keep your Emergency Fund?
What Is An Emergency Fund?

An Emergency Fund by definition is a readily available amount of cash or assets designed for everyday people to help them navigate their way through any kind of financial dilemma.
This could be having to purchase new electrical goods such as a fridge freezer or cooker or it could be to pay for a funeral unexpectedly.
The biggest financial dilemma of course and one in which real people are experiencing all the time right now is the loss of employment or reduced hours at their work.
The loss of a job is the biggest financial dilemma most of us will face and there will be much more unemployment in most countries for the next few months at least.
This is where emergency fund savings come in very handy as they can help us keep afloat until our finances start to get better.
An emergency savings fund is essential for everyone and it this has now because of the worldwide pandemic become much more obvious for people to see.
Emergency funds can really help get you out of some sticky situations and I will tell you how they have helped me over the last few months.
How Much Should I Save?
This is a good question and there is a good average amount for most people but what if you cant save the average amount? Well there are always areas you could cut back on and make some savings.
The average amount you should try and have in emergency funds is around 3 months’ salary. So if you earn £1500 per month then you should try and have emergency funds of around £4500.
These amounts will cover you should you lose all your income. At the very least you then have 3 months’ worth of income in emergency funds in order for you to have time to get a new job or some other form of income.
Obviously, the sooner you sort out your finances the better so you don’t have to use all of your emergency funds but it is nice to know they are there.
I do appreciate that 3 months of your salary as emergency funds can be difficult to save, I myself only have around 1 months salary saved so I do realise it is not an easy task.
There are various emergency fund calculator tools for you to use if you google them and this can help you work out the exact amount you may need to cover all of your expenses.
An emergency fund calculator is perfect if you are looking at cutting back on spending in order to reduce the amount you need to save for your emergency funds.
There are certain things you can cut back on though to make it easier to save. You can also earn extra money to put by.
Taking on overtime in your current job or working a couple of hours in the evening once or twice a week and putting that cash into your savings is a great way to see your emergency fund increase in size.
I myself use a mobile app called Plum. Plum is a great app designed to help you save through a variety of ways and makes it super simple to undertsand.
I currently have my Plum app set up so it rounds up any money spend on my debit card and puts the extra into my plum savings. You will be surprised how much this is.
If I spend say £3.45 in a local store Plum will round up to £4 and put the extra 55 pence into my savings. It really is the easiest way to save.
You could also try cutting back on things you spend on yourself like a weekly trip to the pub etc and put the money you would have spent to one side.
If you are having trouble saving then this article I wrote should help.
If the thought of doing extra hours or saving money by cutting back on the things you love makes you sweat then don’t panic. If you have at least one month’s savings then this could potentially be enough to get you out of a hole short term.
Dont Ignore Debt
Just a quick word of advice before you start saving your emergency funds. If you have store cards or loans or credit cards that still need paying off then it will absolutely be cheaper, in the long run, to sort these out first.
It is all very well having an emergency fund but if you are made redundant and some of your savings go on paying your cards off each month then it seems a little silly to me.
You will be far better off if you were to lose your job that you didn’t have these monthly debts in the first place. Also, the APR is usually sky-high on most of these debts. If you have any of these kinds of debts then target your efforts on these, please.
How An Emergency Fund Helped Me
Like I said at the beginning emergency funds are crucial and sometimes can be hard to come by which is why I only had one month’s worth of salary savings myself.
Like a lot of people around the world, I got furloughed from my full-time job. My job does require me to help keep keyworkers vehicles on the road but there just wasn’t enough work for all of us as there are 10 of us at my job.
So it was decided that teams of two would be furloughed. All in all, I was off work for 7 weeks. During those 7 weeks, I managed to get a lot of stuff done around the house and in particular the garden as it was lovely weather for the most part.
The downside was on the days when I didnt feel much like moving very far from the sofa it led to me thinking about possible unemployment etc which at the moment is looking unlikely thankfully.
It was on one of these down days that I had that our fridge freezer decided to make some horrible noises. It was around 15 years old so we shouldn’t have been too surprised.
Luckily like I said we had savings so it was no big deal and we went and purchased a brand new one without any fuss. This is the kind of ease with which emergency funds can help you.

Where To Keep Your Emergency Fund?
The natural place you would think to keep savings is in a savings account or an ISA. In reality none of these will give you the super quick access that you may need should there be any unexpected surprises with which this money will help bail you out.
Regular savings accounts also usually have lots of rules you need to abide by such as putting in a set amount each month and only being able to make a certain amount of withdrawals each year which is why they are not the best account for emergency funds.
The best bet is to search out the highest interest current accounts and transfer to a new account when you have a bit of a lump sum.
At the time of writing the Nationwide flex account seems to be one of the better ones available with a 2% interest rate on up to £1500. You do need to pay in £1000 per month to get this so you either need to be a great saver or you need to use this as the account your wages get paid into.
After 1 year the interest rate drops dramatically so you would need to switch after this time.
TSB classic plus account is paying interest of 3% on up to £1500 and you must pay in £500 Per month. This would be great if you have started saving and can contribute £500 per month. After 3 months you could switch to keep earning interest.
Unfortunately with the current economic crisis because of the worldwide pandemic, it means there isn’t a huge selection of accounts to earn interest in unless you don’t want to touch your money for a while.
When it comes to savings accounts and if you want to put some of your emergency funds in there then First Direct, HSBC and M&S are all offering 2.75% on deposits fixed for one year but there will be rules to withdrawals, etc.

Summary:
As my wife once said from something she read somewhere “You are only 2 missed paychecks away from losing your home“.
Whether this is correct or not is not really the point I’m trying to make, I have simply added it as it should shock you into having a good think about whether you have any preparations for either a sudden expenditure you were not expecting or worst case you lose your income entirely.
I would love to hear in the comments about people’s various situations and whether or not you have emergency funds and if not what you intend to do about it after reading this article.
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