Emergency Fund: Why you need one & How to Create one

Having an Emergency Fund is so important! You never know what life will throw at you, lets face it anything can happen. Accidents happen, your car, boiler etc breaks down, you lose your job, the list goes on. 

It wasn't until the last few years or so that I really started saving for emergencies and I'm so glad that I did as I've had to dip into it a good few times and then start building it up again. 

Having money available means that you will reduce the need to get into credit card debt or take out a loanMillions of people apply for a loan which you can see in this handy consumer index .  Having an emergency fund helps with protecting you from these financial implications so that you aren't getting into debt.

How much us enough? The recommended amount you should have squiralled away for emergencies should be enough to cover you for 6 months of bills. I can honestly say my emergency fund is nowhere near that amount. I'm sure many of you are the same or don't even have an emergency fund at all.

First of all don't be put off by the idea of having to save a huge amount. The fact you are wanting to start a emergency fund is good enough and its something you can grow over time. Let's be honest here, 6 months of bills is unfortunately unattainable for a lot of us.

Here are my tips on how you can start creating an emergency fund:

- Lower your bills

One of the things that makes sense is to start cutting down your bills.
Compare providers such as energy, internet, mobiles, insurance etc and make sure that you shop around for the best deals before you're due to renew. There are many places where you can find the right tools and calculators to slash your bills.

- Identify waste 

Cutting down costs also means looking at any subscriptions you have and deciding what you can get rid of. For example can you honestly say you use your gym membership? Do you have the time to be reading the magazine/s you get? All the little things add up and you might be amazed with how much you can save. Imagine how much you could be contributing to your emergency fund by directing those payments into your savings. Also consider cutting down on how often you eat out/have a takeaway, how often you go out, any food wastage by meal planning. 

- Be strict 

Make sure you have a budget and once you do than you can set up a standing order so that X amount goes out automatically each month to your account. By treating it like a bill, you will get into a mindset and be able to save successfully. 

Last of all make sure that you define what an emergency is! For example a pizza on Friday evening doesn't count!  Dipping into your emergency fund when you are short before payday is a habit you don't want to get into. 

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