A five-step plan to build up a savings safety net
IF you found yourself in a sudden tight spot, do you have a pot of money set aside to see you through the squeeze? Nearly half (45%) of people don’t have an emergency savings safety net, according to a new survey.
Sarah Coles, a personal finance analyst at Hargreaves Lansdown, which commissioned the research, says: “People of working age should have three to six months’ worth of expenses in an easy access savings account for emergencies.
“Our calculations show that this means having at least £3,000 in savings for the average single person. And that just covers the bare minimum: if you don’t want to be forced to make harsh cutbacks in a crisis, you should have at least £6,000.”
Building up a savings sum like that isn’t easy for everyone, of course. To get started, here are five tips from Sarah for working towards that £3,000 safety net and beyond... ■ Work out where all the money is going
SOME banking apps will break down your spending for you. Otherwise, keep a diary of everything you spend over a few of weeks and check your bank statements to see what your bills add up to.
■ Put it in a budget planner THERE are several available, but the one on Moneysavingexpert is a good place to start. Take all the spending information you have and put it into the planner – alongside your income. It’ll show you how much you’re overspending by, and how much you need to cut your costs in order to free up a lump sum each month to save.
■ Focus on painless cost-cutting SHOP around for cheaper bills, consider trading down to a cheaper supermarket, and cut spending or subscriptions you don’t value.
■ Set up a direct debit
SAVINGS contributions should go straight out of your current account on payday, before you can spend them.
■ Finally, don’t be overwhelmed
A SUM of £3,000 can feel like a huge target, but don’t let it put you off. Save whatever you can afford, as soon as possible, and make a note to revisit it each month.