How to (finally) build your Emergency Fund

We all “know” we need to save an emergency fund, a buffer of cash for when life throws us something unexpected and I don’t disagree. But how do we save up an emergency fund?

We are given mixed advice on how much to save, ranging from 3 months of essential outgoings, or income to fixed numbers like £10,000. This can feel like an impossible task for those of us who haven’t started yet. And even harder if we find saving an uphill struggle.

If the pandemic showed us anything it was that our income can suddenly be reduced by 20% or altogether and that the cost of living does go up, sometimes dramatically and quickly.

I often hear people tell me that they cant imagine they’ll ever be able to save for an emergency fund, or house deposit, let alone start to invest. But it is possible. It starts with a belief and then a decision and then follow these steps.

So let’s break how to start saving down:

  • What are your ‘What Ifs’?
  • What’s the right amount?
  • What’s in a name?
  • What will you use it for (and what wont you)?
  • What might get in the way?
  • What are you willing to compromise on (and what wont you)?
  • Believe it
  • Start Saving

What are your What ifs

What scenarios would really impact your family finances if they happened today. Broken boiler, car, fridge, washing machine. Loss of income for 1,3, 6 months?. What would those things cost you? Do you have anything else in place such as insurance.

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What’s the Right Amount (for you)

From your What If scenarios, ask yourself What can’t I afford to prepare for and how what would it cost. Add them up. That’s your starting number.

Now you have a monetary goal. It might look impossible but don’t be put off, we only have to Start.

What’s in a Name?

More than you’d think! If the name of your savings is something that triggers negative thoughts and feelings then it is harder to engage and commit to that. Our minds don’t want to think about emergencies and catastrophes so we don’t.

Choose a positive name, something you want to build, want to look at, want to commit to.

What are the Savings to be used for?

Savings aren’t permanent, they’ll get used from time to time, that’s kind of the point.. Decide what scenarios and reasons you’ll use it for and what you wont. And don’t touch it for anything other than those reasons. And top it up once you’ve had to use it.

What might get in the way of Saving?

How Money Smart are You?

Ask yourself what might undo your emergency savings and get in the way for you? Is it how you feel, spending, a change of income?

Then look for ways you could overcome these. Get support, make the account harder to access? Create a vision board. Get creative. And if you do undo then don’t give up.

Identifying the Threats before they crop up means you’re prepare for them and can overcome them to keep on going.

What are the compromises?

When money is still tight saving can feel impossible. Decide what you are willing to compromise on today for the security of those savings. Also decide on what you wont compromise on. There is no golden rule, Its personal.

To begin with something may have to give in order for you to save and pay yourself first. What has the least emotional impact? Or the biggest financial impact. What could you pause on for a few months to get started? Can you increase income anywhere?

Believe it

For one moment suspend belief and imagine that number you’ve written down is actually in your bank account. Your achieved it. Imagine how you’d feel. What would you be doing, saying and feeling then? How would that safety net make you feel? What might change afterwards?

Start Saving

So now you’ve got a number, an account opened with a purposeful name. You know why you are saving, what its for and when you will and won’t use it. Its time to Start saving.

Next is to follow these Six Steps to Successfully Saving

Learn to Love, Make, Save and Grow your Money

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