
Energy usage
Understanding your energy usage
With inflation and interest rates rising and the economy looking more shaky, it makes sense to build some resilience into your finances if possible, by putting an emergency fund in place. Here we show you how.
By having an emergency savings fund you'll have money to fall back on should the unexpected happen, or should you find yourself without income for a period of time.
The aim of this cash is to help see you through a difficult period - and help you face whatever lies ahead.
A decent pot of savings will provide an important buffer against periods of insecurity. It will mean you will still be able to pay your rent or mortgage, and afford essentials, such as food and utility bills.
Without this cushion in place, you could be in a much more precarious financial situation.
Putting some spare cash away is likely to feel challenging in the current climate, with so many demands on our cash. But you don’t need to save huge amounts to make a difference over time.
As a rule of thumb look towards a target of having the equivalent of between three and six months’ worth of living expenses put aside in a savings account.
To work out how much you need, tot up all your essential outgoings, and multiply this by the number of months.
Once you have this target in mind start with small savings each month, where possible. Even if it is a small amount, such as £10 or £20 a month - try not to miss putting some savings away. Over time the pot will soon start to grow.
Your funds should be in a competitive easy access account so you can get your hands on your cash quickly, should you need to.
The problem is, with inflation at a high, most people’s savings are effectively losing value.
This makes it more important than ever to shop around and get as good a return as you can.
You can see the best savings rates MoneySuperMarket has currently on offer and rate them by type of account, access and minimum deposit amount. This should help you with your choice - so you can find the best account to suit your needs.
Always scour the terms and conditions of a savings account first. You should check things such as the minimum and maximum deposit, and whether there are any limits on the number of withdrawals you can make per year.
Ideally, you want to choose an account that you can dip in and out of easily, without restrictions.
You might think that if you’re facing an unexpected expense – such as a boiler breakdown or your car failing its MOT – and don’t have an emergency fund, you could just put the cost on a credit card.
The problem is, unless you’re careful, card debts could soon rack up, you may find yourself in a position where it’s hard to pay off your plastic.
If you have no choice but to turn to a card, make sure you seek out a 0% purchase card. That way, you’ll be able to spread the cost over a period of time without paying interest.
You can currently get cards offering long terms at 0% interest. You can compare rates here.
But don’t forget that with any purchase card, if you fail to clear the balance before the 0% period ends, you will be charged interest. Do all you can to repay your plastic before the high rate kicks in.
Better still, work hard to build your emergency fund. That will give you the peace of mind of knowing you can survive tough times ahead in 2022 without having to borrow to make it through.
Once you’ve got your emergency fund in place, you should continue to build resilience by building savings elsewhere.
The good news is, improved competition means savings rates are on the up. And, if the Bank of England does increase the base rate – as is being widely speculated – we could see rates edge up further still.
For cash you won’t need for another six months or more, look at locking it away in a fixed-rate account, as these accounts pay some of the best rates.
Equally, if you’re not comfortable about tying your money up, a compromise option could be a notice account. The maximum notice term is currently around four months, and you may be able to find rates above 1%.
Shop around to find the very best rates available.
The key is to get into the savings habit. This will mean you are on stronger financial footing to get through whatever lies ahead.
Our handy tips and tools will help make sure you never overpay again
Everything you need to know about the wonderful world of car insurance.
Our guide will help you protect your property and possessions.
Discover how to bring down the cost of a major household bill.
Our definitive guide to choosing the right credit card.
Find out how to choose the right life insurance for your needs.
What to consider when picking a current account.
See how travel insurance can help protect your holiday.
Understand the difference between secured and unsecured loans