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We all know the importance of having a financial buffer should the unexpected happen, yet unfortunately, it seems that too few of us take it to heart; research from Equifax shows that 43% of Brits have no savings put aside for unexpected financial events, with their easy access emergency fund being woefully lacking.
Perhaps as a result of this, 29% of respondents are concerned about their ability to meet their financial commitments over the next six months, including utility bills and mortgage payments, a figure which rises to 37% when looking over the next two years, and 48% for 35-44 year-olds.
Renters are likely to find things more difficult, too, with just 33% having some form of savings to fall back on, compared with 67% of homeowners – and with 43% expecting their rent to rise in the next year, and 42% of those saying they're unable to afford any increase, their finances could be in the firing line.
"The extent to which people live pay cheque to pay cheque with no financial cushion is a particular concern in the current uncertain economic environment," said Jake Ranson, Banking and Financial Institution expert at Equifax Ltd. "Debt levels are on the rise, and wherever possible consumers should budget for unexpected expenses. The recent interest rate hike highlights the importance of setting aside some cash to counter any financial shocks."
If you're one of the many who doesn't have a suitable emergency fund, now's the time to start building one. It's generally recommended to have at least three months' worth of income squirrelled away in an easy access savings account that can be readily turned to should an emergency strike, such as redundancy, as that way you'd still have enough to cover all necessary bills.
However, you don't have to stick to easy access savings accounts – as long as you can access your cash at short notice, you may want to think outside the box. High interest current accounts could be the perfect alternative given their higher interest rates, but with the same level of flexibility, they could be just the thing for an emergency fund. Just bear in mind that they may not be suitable for your three-month back-up fund – high interest current accounts tend to only pay high rates up to a certain balance, which may not be equivalent to three months' salary, but could be the ideal pot for boiler breakdowns and related emergencies.
Alternatively, if you want to make sure you get in the habit, what about a regular savings account? These accounts tend to offer higher interest rates than their standard counterparts, provided you're able to commit to setting a certain amount aside each month, which could be a great way to see your pot grow (just make sure to check the terms and conditions, as some come with access restrictions).
However you go about it, it's important that you get started as soon as possible, so check out our Best Buys to find the best savings account for your needs and get saving!
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