Building up some emergency savings can help you feel more financially secure, ensuring you have money there ready for a rainy day. But what type of emergency savings should you have? Here are four types of emergency pots to consider.
1. 6 months of bills and expenses
You never know what’s around the corner, which is why it’s good to have some emergency savings to hand. You could lose your job or need to cover your rent/mortgage and other payments for a period of time. Building an emergency fund takes time, but once you’ve got it, you can keep adding to it to help you boost your financial security and know you’ve got a healthy amount of savings should you ever need them.
2. Home repairs
A disaster could happen in your home at any time. From accidents to bad weather, there is a lot that could happen that’s out of your control. It’s important to get homeowners insurance to make sure you can recover these costs, but having some savings in place will give you extra assurance, and can cover you for the things your insurance can’t.
While some events will be out of your control, there is a lot that can be avoided through care and maintenance. Keep warranty details safe for appliances within your home, in case they can be covered through other means.
3. Car emergencies
Many people rely on their transport to get them from A to B, so if your car broke down – would you be able to cover the repairs? Having a savings pot for car emergencies can help you cover repairs, and possibly even the cost of a new car if needed.
Your emergency car savings can also help you in case you have an accident on the road. If you need to hire a criminal defence lawyer, you’ll have the fee already. It helps to give you some peace of mind that you’re covered in case of an accident or damage.
4. Unexpected bills and expenses
There’s nothing worse than being hit with a big bill or an expense you weren’t expecting. If you have some rainy day savings, this can help you cover these bills, so you don’t end up taking out loans and other credit to get by. It’s important once you’ve used your emergency savings to build them back up again, ready to help cover the next emergency.
Building up an emergency fund will help you out in difficult times, so it’s important to commit to saving to help you get there. From cutting back to no-spend challenges, there are different ways you can build up your savings ready to save them for a rainy day. Separating them into separate pots once can give you further confidence with your savings, knowing you’re covered for a range of eventualities should something happen. Start saving now and start growing your emergency fund.