Emergencies can happen at any time and, unfortunately, they often cost money. Whether your car will not start or the “flooding” in your garden is actually a backed-up sewer, you never know when you might unexpectedly have to part with hundreds, even thousands, of your hard-earned pounds.
That is why an emergency savings fund is not just something that is nice to have, but is (in our opinion) mandatory for everyone. If you need help building your fund, we have shared the best money saving challenges to quickly reach your goal.
The 1p savings challenge offers a simple, low-effort way to ease into saving money and gradually build up your emergency fund. The idea is that you save 1p on day one, then increase by 1p every day (so, 2p on day two, 3p on day three and so on). If you do this for a year, you will end up with £667.95 by the time you are done.
Certain banking apps allow you to automate this saving method, so your money is put into your emergency fund without you having to remember it every day. It is an effective challenge for getting your fund started without needing to save a big chunk to begin with.
If you want to aim for a clean number in your emergency fund, you will probably prefer the £1,000 emergency fund challenge. Just give yourself a realistic timeframe for reaching the £1k point and stick to your weekly or monthly savings target until you get there.
For instance, to save £1,000 in a year, you just need to save £83.33 per month. This is far less daunting than trying to get that cash together in just a month or two. Plus, getting into the habit of saving every month will help you improve your money management.
If you often find yourself spending unnecessarily during the weekends, this challenge is for you. Those Saturday morning coffees, takeaways when you do not want to cook and impromptu retail therapy sessions all add up.
Challenge yourself this year to avoid all non-essential spending on at least two weekends a month. That does not mean you can’t have fun! Just make your coffee at home and entertain yourself with free activities in the UK. As a result, you will have spare change at the end of the month that you can move straight into your savings.
Most banking apps nowadays allow you to round up your purchases into a savings account of your choice. That means every time you spend £3.85 on a meal deal or £56.42 on your weekly shop, the remaining amount up to the next pound will be automatically added to your savings.
This is one of the easiest ways to build your emergency funds without effort and you are unlikely to miss the odd 40p here and there. But, of course, this method will not build your savings quickly, so we suggest pairing it with a monthly top-up.
Experts typically recommend saving three to six months' worth of essential living expenses in an emergency fund. That way, if the worst happens and you are out of work for a while, you know you have the funds to see you through.
It is never too late to start saving! Choose a challenge from this list that feels the most achievable for you and start contributing to a more secure financial future today.
Is Saving 10% Enough for a Healthy Savings Account?
Should You Save Or Pay Off Debt First?
Are credit lines better than payday loans?
Check out our other great content in our Info Hub, with articles about the different types of credit products, money management tips and help with saving money!