As Financial Planners, we often drill home the importance of a cash emergency fund.
The received wisdom is to hold between three and six months worth of essential expenditure in cash savings.
This ‘rainy day’ money is there should the worst happen; if you lose your job, have an accident or experience ill health, or need to spend money unexpectedly on a home or car repair.
A suitable amount for your cash emergency fund will depend on your circumstances. 3-6 months worth of spending is fine for someone of working age. For a retired person without the disposable income required to replenish an emergency fund, a year or more in cash makes more sense.
Something interested happened in our village, and (judging from the news and social media) in towns across the UK, this week. People started panic buying.
With rolling news media reporting a rising infection rate from the novel coronavirus and COVID-19, it’s little surprise that many people hit the supermarkets hard and bought up essentials, including toilet paper and hand sanitizer gel.
Getting a delivery slot with Ocado is also proving harder than usual, due to shoppers buying larger deliveries.
The fear driving panic buying of loo rolls, painkillers and pasta is rather rational. If you are forced to self-isolate inside your home for weeks, then having a stockpile of these essentials makes sense.
As one economist shared on Twitter, it’s better to panic early rather than later, and it’s better to be paranoid and wrong than non-paranoid and wrong.
I’m not, by the way, advocating you take on the habits of an American prepper and start hoarding tinned goods in case of TEOTWAWKI.
But it is worth thinking about your comfort, and that of your family, should you need to stay home for days, weeks or even months, due to COVID-19 or any of several other significant risk factors.
Those living in the various parts of the world regularly subjected to natural disasters already have this mentality in place. They know they can safely hunker down and live without reliance on a fragile supermarket supply chain.
When thinking about your emergency fund, it’s time to think beyond cash in the bank (although that helps), to what’s in your pantry.
