Emergency savings.. Something we all know that we should have but somehow most of us never implement them into our financial goals. Emergency savings are for life’s unexpected disasters, such as the loss of your job, your phone breaks and its vital for your job or maybe you run out of money in a foreign country and you desperately need funds to get home. They are not for splurges, or holidays!!
Most experts recommend around 3 months worth of emergency savings no matter what your age, three months savings means your monthly income x 3 so if you earn £1000 a month you should have or be building up to £3000 in emergency savings!
The 20% Savings Rule
Many personal finance gurus recommend that you should be saving at least 20% of your income and putting it aside towards savings priorities, such as; a down payment on your first house, emergency savings or perhaps even just general savings. It is widely thought that this is the ideal amount to save as it allows you a pretty hefty savings contribution per month that will soon add up and it also allows you enough money to LIVE. Which means to pay your expenses and have fun.
Let’s just say you earn £1000 a month which is a pretty average monthly take home pay among young adults around the age of 20. If you save 20% that means £200 a month which over the course of a year will add up to a whopping £2400 Which can pay for a lot of things and contribute towards your priorities.
Just a little quick tip to keep in mind!
Save £1.00 A Day
For those that are on an extremely tight budget; saving just one pound a day can yeild massive results in the long term provided that money is well placed wether it be invested or stored in savings. Let’s look at savings without intrest 1 x 365 is £365.00 a year, which does not seem like a lot but let’s just say you do this every day for 50 years you would amass an impressive £16,000 in savings. Just imagine how much you would have if you changed that one pound into two or three pounds a day.
Let’s look at the calculations over 50 years if you added 5% intrest! Over £79,000.
The message of this short quick tip post is that small savings now will add up to large sums over time thanks for the power of compound intrest!