A recent survey has found that the typical working person in the UK has around a month’s worth of savings to be able to maintain their current lifestyle should their income stop without warning. The data collected from 2,000 people found that the average person’s savings would support them for 32 days.
More worryingly, 26% of those who responded said their savings would only last a week or less. 22% said they had less than £500 in savings, whilst 23% admitted to having no savings to support them at all. The findings suggest that those in Northern Ireland have savings which would last the longest, with an average of 36 days’ worth of money put away. Workers in Wales, meanwhile, have an average of just 26 days of savings to support them.
Whilst most people have emergency savings to help them with smaller one-off unexpected costs, such as repairing or replacing a home appliance, the possibility of finding yourself without a source of income should not be considered an impossibility. Losing your job or splitting up from your partner can happen unexpectedly and most people will need some time to help regain some financial stability. The majority of financial advisers suggest having a minimum of three months’ worth of salary put away in case of an emergency so that you don’t find yourself without anything to fall back on. There are also insurances that you can purchase to help with these potentially catastrophic events.
However, an emergency fund should be just that: money readily available for when you suddenly need money to pay for an unforeseen extra cost. If you have more than six months’ worth of salary in a current or instant access savings account then you’re likely to be missing out on the opportunity to make your savings work for you in an account that’s less easy to access but offers a better rate of interest.