Millions of people have no savings to fall back on in the event of an emergency, the Money Advice Service has found.
In a poll of over 2,000 people, a third confessed that they have no savings to draw upon in the event of an emergency.
Yet, more than double this number – 71% – experienced an unexpected cost that caused havoc to their budgets.
Almost three in ten (29%) have faced car repair bills averaging £1,341, while around one in seven people experienced washing machine repair charges (av. £245), vetinary bills (av. £248), and/or the cost of a broken tech device (av. £294).
The service described these people as ‘living on the edge’ from day to day, with many left to worry about how they would make ends meet if they encountered a costly unexpected problem.
The struggles have been compounded by families striving to help each other out of a hole.
Around one in eight (12%) ended up offering emergency loans to friends or family members worth an average of almost £2,500.
 "Home and Cash")
Save £3 a Day
The Money Advice Service recommends that, in an ideal world, people should have enough money to cover essential outgoings (mortgage, food, utility bills, etc) for three months.
But for those struggling to build up an emergency fund, it is recommending that people save £3 per day to prepare for any unexpected costs that may arise.
The advance planning will offer some peace of mind for those without savings, while those with a nest-egg will have less need to dip into it if an emergency arises.
Where to Build Your Emergency Savings Fund?
Frustratingly, the returns available on easy-access savings accounts are fairly weak at the moment.
Nevertheless, if you find that you are able to gather £90 per month, it is worth investigating where you might get the best returns for your cash.
Some of the best rates are available through regular saver accounts, which reward regular monthly deposits of as little as £10 with above-inflation rates of interest.
However, the majority of those offering instant access to funds are branch-only accounts (Kent Reliance – 4%, Nottingham – 3.10%, Leeds – 3.05%), so emergency savers would need to access a branch to pay in and withdraw the cash.
Aside from this, it is worth using up your cash ISA entitlement (£5,760 this tax year), as no tax is payable on the interest you earn through these accounts.
(Find out more about cash ISAs here.)
The Direct ISA through National Savings & Investments (NS&I) currently offers 1.75%, and money can be withdrawn at any time. However, the popularity of this account has led to a succession of rate cuts, and it is due to fall again to 1.50% at the end of February.
A variety of local lenders, including Stafford Railway, Mansfield, Darlington, and Hinckley & Rugby, will match this 1.75% offer. All of these accounts are predominantly branch-based, though they can also be managed by post.
All are worth investigating, depending on your location, to generate more from your hard-fought efforts to save.
{loadmodule php,News - Author Box}
{loadmodule php,TwitterButton}