Investing money for the long term – perhaps your children’s education, or your own retirement – is a vital part of your financial planning; however building up an ‘emergency’ or ‘rainy day’ fund should be your first priority.
- Recent surveys have shown that around 20% of people have no savings whatsoever!
- Around a third of people have less than £500 put aside that they can get their hands on.
If you are one of these people, you are putting yourself at the mercy of everyday life’s little (or big) hiccups.
If an unexpected expense crops up, you need a new boiler, the car packs up, a medical procedure is needed – the list is endless – how are you going to deal with it?
How great would it be if you didn’t have to rely on an overdraft or a loan, you didn’t have to go to your family or a friend, or bring out the credit cards?
The old military term has got it right: Proper Planning and Preparation Prevents Piss Poor Performance. You might prefer the Scouts’ more toned down version: ‘Be Prepared’!
How to start?
Most people tackle saving money the wrong way round. For example: “I would love to save some money, but I get to the end of the month, and there is never anything left”.
If you really are committed to building up a savings pot, it helps to get disciplined. Rather than waiting till the end of the month, set up a regular direct debit at the beginning of the month into a savings account. In your mind, you will start to see your savings as a regular commitment, along with mortgage, rent and bills.
How much should I save?
The actual amount should be realistic and manageable. If you get the level right, you may not even notice it. Remember you can always increase it as time goes on.
Having a proper goal will always help to achieve the aim. I always advise my clients to aim to have a minimum of three months’ salary, or three months’ household expenditure on deposit at all times.
Henrietta Oxlade is an Independent Financial Planner with Radcliffe & Newlands and MyFamilyClub’s in-house finance sage! She has been advising individual clients since March 1988, which is why many of her clients consider her part of the family. If you want to contact Henrietta, email us on [email protected] and we’ll put you in touch.