There was once a time that everyone had an emergency fund, young or old everyone had something put away for a rainy day.
Today savings for emergencies are rarely spoken about and the first time many people save money is for 6 months to go on holiday is in their early 20's. When I was at School and Sixth Form I did have a bank account and this came with a savings account but this spent over 15 years of my life with exactly nothing in it! I was very lucky I had no major emergencies and parents who would have supported me through the minor ones meaning I did not go into any major debt.
So firstly what is saving:
Saving is storing money in either an easy to access (you can take you money out any time) or slightly harder to access (your money is locked away for a certain amount of time) bank account. This money is not spent on monthly needs but is being saved for a goal or event in the future.
Why we should have emergency savings:
In simple terms savings offer you security plus the ability to overcome unexpected expenses or improve your lifestyle through large purchases you would not be able to make using your monthly income such as a car when yours breaks.
How to start emergency saving:
EVERYONE (and I mean everyone!) should have an emergency fund! Not having an emergency fund is one of the key ways to get into debt in your early 20's. I recommend this is in a separate bank account or pot (if you use Monzo or similar), You can never be too young to have an emergency fund.
The amount in your emergency fund will vary but as a good rule of thumb it should never been less than £1000. Once you have the £1000 you should try grow this fund to three month of expenses. This includes your rent or mortgage, bills such a gas and electric, food and travel. You may also wish to consider other unexpected expenses including car repairs, broken glasses or vet bills.
Although slightly out of date the below is from the Unexpected cost report from 2013 this illustrates the average cost of unexpected repairs and events.
As you can see even one unexpected event can cost over £1000 so think of this as a minimum rather than a maximum.
My emergency saving journey:
After graduating university I went straight into paid work and saved £150 a month until I had reached £1000. I then left this alone and didn't add any more to this amount (this was my big mistake).
After a rent emergency where I had to pay 3 months rent on two properties I had £0 in my emergency fund and started again. This time it only took me two months to have the initial £1000.
I then sat down and calculated my monthly expenses I could not live without, these includes:
Rent and Bills - £550 a month
Car - £200 a month
Food - £50 a month
Other (this included my MOT, prescriptions and other expenses that are once a year) - £20 a month
Total - £820 a month
Three months expenses - £2,460.00
This seems like a large amount to save and still have a life but I broke it down into 12 payments of £205 and treated this like a bill. I set a direct debit up for this amount to leave my account on pay day so I never had to think about transferring it to the right account.
While this took over a year (I had an emergency regarding car tyres and therefore used some of my emergency fund) I sleep better knowing should I loose my job tomorrow or my car not start in the morning that I have the fund to cover this in my emergency fund!
Emergencies happen to us all so being prepared in any way is brilliant and a savings fund however small is an essential first step in becoming self reliant and financially savy.