Creating and maintaining an emergency fund is one of the foundations of successful Financial Planning.
Along with budgeting, clearing debts and insuring against financial catastrophes, emergency funds have an important role to play in keeping you out of trouble should unexpected things happen in your life.
Once you have created an emergency fund, there will of course be times when you need to use it, in full or in part.
Some new research has found that almost a third of people had to dip into their savings to cover unexpected expenditure during the last quarter of 2015.
The research from Lloyds Bank found that only a quarter of people they asked said building an emergency fund was their primary reason for saving money.
The Lloyds Bank Savings Report also found significant regional variations when it comes to savings.
According to their research, people in the South West are the least likely to have saved throughout the year.
A much smaller proportion that average saved nothing here in the South East of England; 15% compared to a national average of 21% in 2015.
It was positive to see in the research that over a quarter of savers have set themselves savings target and are on track to achieve their savings goals.
When building an emergency fund, it is important to establish precisely how much you plan to save, how much you can afford to put aside each month and under what circumstances this money will be used.
Of those savers on track to reach their goals, half attribute their success to good budgeting, with 30% stating that setting realistic savings goals in the first place has helped them stay on track.
Almost three-fifths (58%) of those who don’t believe they are on track to meet their savings targets feel that this is due to increased living costs, with this being the most common reason by a significant margin.
During a recent episode of the Informed Choice Podcast, I talked about ‘rethinking the emergency fund’.
If creating and maintaining an emergency fund is high on your list of priorities for 2016, do listen to the episode.
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