Saving for a rainy day

Back to News & Views

What’s the right emergency fund amount for you?

An emergency fund is money you put aside to cover a financial shock. This could be losing your job, or a large, unexpected expense. Building an emergency fund can help prevent your needing to borrow money or make difficult financial decisions in those moments, by giving you savings to fall back on.

Worryingly, one of the things the COVID-19 pandemic has demonstrated is that anyone could find themselves in financial difficulties. But three out of ten (30%) working people in the UK could only manage for up to a month financially if they had to rely on their savings to cover their outgoings, research reveals[1].

Financial wellbeing 

A quarter (26%) of workers said they had less than £500 in savings. The results also highlighted that the issue affects younger people most severely, with 40% of 18-to-34-year-olds in work unable to manage more than a month if they found themselves without their salary.

The COVID-19 pandemic has intensified issues around financial wellbeing in the working population. As well as one-fifth (21%) admitting to saving nothing on a monthly basis, more than one in ten (15%) have increased the amount of debt they have over the previous 12 months, and a quarter (26%) have had to borrow from family or friends during the period.

Unexpected bills 

Almost half of working Britons (49%) said they feel stressed about their financial situation. This doesn’t just cause problems with meeting unexpected bills or dealing with a loss of income due to sickness or unemployment.

Money worries can affect all aspects of people’s lives, which is why it is important for people to build a healthy savings pot and improve their financial wellbeing to protect themselves from any sudden and unexpected changes to their situation. There’s also clear evidence that low financial resilience can also have an impact on mental health.

Financial difficulties 

If you have money set aside for emergencies, you’re far less likely to experience financial difficulties or have to borrow at a high interest rate if things go wrong or your circumstances change. Knowing you’ve got some money you can access is essential.

Typically, you should aim to have enough money in your emergency fund to cover your expenses for at least three to six months. Saving regularly is a good way to build up an emergency fund. You’ll find that if you get into the habit of saving each month your savings will soon mount up.

Illness or injury 

If you are also worried an illness or injury could leave you without enough to pay bills, there are ways to protect your income. To protect you and your family comprehensively, you should consider insurance – especially if your employer does not have an occupational sick-pay scheme.

The four most common types of insurance that protect your income are income protection insurance, critical illness cover, life insurance and payment protection insurance.

How much should you save?

How much you need, and what an ‘emergency’ is, will depend on your situation. It’s best to split your savings, so you’re keeping some to hand for emergencies and putting the rest where it can work harder for you. To find out how we could help, please contact us.

Source data:

[1] Yorkshire Building Society research, 06 July 21

Book your FREE, no obligation discussion today. Schedule Appointment

Sign Up to our mailing list - Receive regular news, tips and financial commentary from the Gemini Team.

Latest News

  • Cost-of-living crisis delays homeownership, having children and retirement Rising living costs have been so significant in recent months that most UK households will have noticed a squeeze on their monthly budgets. Not only does this have a direct impact on people’s lifestyles, even though they are making every effort to cut back, but it has a knock-on effect on their lifelong goals such as owning a home or retiring comfortably. [...]

  • One in six over-55s have no pension savings yet Despite the fact that the government has been trying to encourage people to save for their retirement through initiatives such as auto-enrolment, there are still too many Britons who have no pension savings at all. Research reveals that a fifth (20%) of people still have no pension savings at all, and people nearing retirement aren’t doing much better. [...]

  • What to consider if you have multiple pension pots The employment landscape has evolved significantly over the last few decades and changing jobs multiple times before retirement is now very much the norm. But did you know, there is an estimated £9.7 billion of unclaimed UK defined contribution pension funds? [...]

  • Minimising the impact on your personal finances If you’re a higher rate taxpayer, the freeze on the Income Tax threshold will have meant an increase in your tax bill. The reason for the increase stems from the Chancellor’s decision in April 2021 to freeze the higher rate tax threshold rather than increase it in line with inflation. [...]

  • Preparing both ‘the family’ and ‘the money’ for the transition of wealth to the next generation If you want to pass wealth on to your children and grandchildren, it’s wise to contemplate when it might be best to make that gift. Should you transfer wealth during your lifetime — or after? [...]

  • Deciding whether to withdraw cash from your pension pot Choosing what to do with your pension is a big decision. If you’ve been saving into a defined contribution pension (sometimes called ‘money purchase’) during your working life, from age 55 (age 57 in 2028) you need to decide what to do with the money you’ve saved towards your pension when you eventually decide to retire. [...]

  • How to protect and grow your wealth over time Inflation is one of the most important factors that savers and investors must take into account when making decisions about their money. Although inflation can eat away at the purchasing power of your savings, it can also create opportunities for profit if you invest in assets that are expected to increase in value faster than prices overall. [...]

  • No one-size-fits-all answer to this question When is the right time to retire? There’s no one-size-fits-all answer to this question – it depends on your personal circumstances. However, there are a few things to consider that may help you decide when the right time for you is. [...]

  • Millions of savers think inflation will leave them better off Despite inflation reaching its highest rate for many decades, some people in the UK are not aware of its impact on their finances. More than half of all cash savers (52%) don’t know what impact inflation will have on the real value of their cash savings over time [...]

  • Just two out of five have planned for inflation in retirement Retirement planning can be complex at the best of times, so it is easy to understand how some people can find it daunting to take into account factors like inflation. The reality is that inflation hurts everyone, but it can be especially harmful to retirees. [...]

  • What’s the right emergency fund amount for you? An emergency fund is money you put aside to cover a financial shock. This could be losing your job, or a large, unexpected expense. Building an emergency fund can help prevent your needing to borrow money or make difficult financial decisions in those moments, by giving you savings to fall back on. [...]

  • 3 tips to maintain your financial wellbeing The rising cost of living is one of the most pressing issues facing many families today. The price of food, energy, fuel and other necessities has risen significantly in recent months. This has made it difficult to make ends meet and has put a strain on many household budgets. [...]

Gemini Wealth Management Ltd is Authorised and regulated by The Financial Conduct Authority Registered in England & Wales No. 5919877 Registered Office: Gemini House, 71 Park Road, Sutton Coldfield, West Midlands B73 6BT The Financial Conduct Authority does not regulate tax and trust advice, will writing and some forms of buy to let mortgages. The guidance and/or advice contained in this website is subject to regulatory regime and is therefore restricted to those based in the UK.

Website by Mellow Marsh Software
© Gemini Wealth Management Ltd
Privacy Notice | Cookie Policy