Everyone should have a pot of emergency money available for the sudden big expenses that occur in life, such as vet bills, a broken washing machine or unexpected car repairs. I know sometimes it can be hard to put money to one side because of everyday expenses. But there are still ways you can be prepared and know where your emergency cash will be coming from when needed. Many people think if they have a “spare” credit card for any sudden expenses then they are covered but there are credit card alternatives available too. Take a look at five ways to ensure you always have an emergency cash fund:
1. Savings
Read on if you need emergency cash right now. But if you’re reading this article asking yourself “How can I ensure I have emergency money for the future?” then this first point is for you. It’s best to always put away some of your hard-earned cash for savings. Your future self will thank you, be your future friend.
It’s better to build your fund up quickly so it’s there straight away in case it is needed. You never know when an emergency will hit you. So if you’ve got any nice payouts due to you such as a big contract or tax rebate, then consider investing it into an instant access savings account and keeping it there until needed.
Don’t worry if you’re not expecting a windfall. Although it will take longer to accumulate your emergency fund, there are benefits to building it up slowly. Saving small, regular payments will get you into the savings habit. It seems hard to start but when you look at the facts you will wish you’d started saving sooner:
- If you started saving £1 a day one year ago you’d now have £365 in your fund
- If you started saving £10 a month five years ago you’d now have £600
- If you started putting aside £100 a month, just one year ago you’d now have £1200
If you don’t feel you can afford to put any money away each month take a look at ways to earn extra money. You could have a clear-out and hold a car boot or garage sale. Put all your earnings aside for your emergency cash fund. Once you develop these good financial habits and you have a healthy emergency cash fund you can put excess savings into long term savings account for any long term goal you wish or just for your future.
2. Keep Your Overdraft Clear for Emergencies
So, you didn’t start saving a year ago and time travel hasn’t been invented yet? Never fear, there are still ways to make sure you have an emergency money pot. If you have an arranged overdraft limit with your bank account you could use your overdraft when an emergency arises. There are two negatives to relying on your overdraft. Firstly, because it’s attached to the current account, some people can find it’s too convenient to dip into an overdraft, especially when banks tempt you to use it with zero per cent offers and by regularly increasing the facility. The second negative point concerning overdrafts is they can have a high-interest rate and short payback time so should only be used if you can afford to pay back the money (plus interest) quickly and in full, which isn’t always the case when it comes to cash needed in an emergency.
3. Family & Friends
Nobody wants to have to ask friends and family for money. However, in an emergency, you may find that trusted friends and family offer to help you out if they’re in a situation where they can afford to do so. If this is the case, be sure to put it in writing and plan out repayment terms and any potential interest to keep things as smooth as possible. Budget well and try and earn extra money so you can pay them back as soon as possible, so things will be less awkward in the long run.
4. A Credit Line
In an emergency situation where you need extra money in the short term, you could benefit from a credit line. Polar Credit is a new simple way to get fast access to credit. You can apply online for a credit limit that works for you. If approved, you can use it as and when you need to. The bonus of using a credit line is if you don’t use it, you don’t pay for it. In the event of an emergency, you can transfer any amount over £25 (and up to your credit limit) straight to your current bank account. Repayments are flexible, you can pay the minimum amount or pay extra. You can repay your balance at any time and there are no early settlement fees. As an example, using Polar Credit to borrow £100 for 30 days would cost you £6.60 in interest and charges as long as you make your repayment in full at the end of the 30 day period. Check out their website as there is a lot more helpful information on there. Having a credit line can even increase your credit score if used appropriately.
5. Seek Help
Occasionally there may be circumstances where you haven’t got any savings or means to borrow money. If you need emergency money please seek help. The Citizen’s Advice Bureau may be able to advise you of particular pots of money or charities available to help you in your particular emergency. They can also help you with budgeting and saving money for the future so you are prepared and in a better position for the next emergency that may occur.
In Summary
In summary, it’s beneficial and more affordable in the long run to save up and have an emergency fund. Unfortunately, that’s not always possible but there are other options available to you. Remember to always borrow money responsibly and within your means to repay. Try to get in the habit of using good budgeting and saving rather than needing to rely on credit.
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