Why Build an Emergency Fund? The Basics
One of the earliest steps to securing a financially free future is to build up a solid emergency fund.
Now this is different for different people and definitely different at different stages of your life but as a rule of thumb a fund of 3 – 6 months of essential outgoings is the number to aim for, when in work.
The main reason for this is peace of mind.
It allows you to then move on and invest your savings confidently in a manner that will allow them to grow much faster. Safe in the knowledge that if you need money quickly you have a pot set aside for that exact reason.
One thing we can guarantee in financial services, (and there aren’t many) is that your invested money, will, at times go down in value. Well if that just happens to coincide with when you need to access money, for a boiler repair or car issues etc, then it can really hurt your long-term goals. Selling investments when they are down in value is a sure-fire way to shoot yourself in the foot.
Hence keep that emergency fund available, accessible and if you can get it working with as high an interest rate as possible, do. But don’t worry about that element of it, it’s the accessibility that you really need.
There are lots of options to choose the place to hold the money, National Savings & Investments, your existing bank will help you out and all of the comparison sites have the latest deals, but get this job sorted and you can then move onto the more fun investing stuff!