No matter how well you plan your budget, there is always the potential for an emergency expense that you cannot cover. These expenses are, by their very nature, unplanned– a car accident, a broken kitchen appliance, the need for new glasses or a dentist visit. They happen, and they happen suddenly– and sometimes, there just isn’t room in your budget to accommodate them.
While you can’t plan for a specific emergency, you can fund an emergency pot that can be called in to help you cover unexpected expenses. As thisismoney.co.uk notes, 25% of people don’t have this kind of safety net; if you fall into this group, then an emergency pot is something you have to investigate.
However, most of us live on thin budgets that are stretched to breaking point already. So how can you save towards your emergency pot without even noticing the loss of the money? It’s actually easier than you might think.
“Tidy” your bank account
“Tidying” your bank account is a simple method that allows you to accrue a good sum of money without too much effort. The idea is that your bank account(s) should always have round figures. So it’d work like this:
- Your bank balance is £354.50
- You then have two choices to “tidy”.
- Choice one is a basic, simple tidy that is preferable if your budget is struggling. You would tidy your account balance down to £354.00; putting the extra 50p into a separate account as your emergency pot.
- Choice two is a more comprehensive tidy, and is a good choice if you’re largely managing well within your budget. You would tidy down to the nearest 10, so in this example, that would be £350. This gives you £4.50 for your emergency pot.
£0.50 or £4.50 might not sound like a lot, but you’ll be amazed at how quickly it builds up. Few direct debits and payments are whole numbers, so you are likely to find yourself having to tidy a couple of times per day.
Intrigued? Here are a couple of common questions about the idea of tidying funds…
“What if I can afford to put aside more?”
Then by all means, do so, but don’t stretch your budget for it. The point of tidying is that you will barely notice it.
“What if my emergency expenses is more than I have set aside in my pot?”
Of course, there is every chance your emergency pot may not be enough to cover your unexpected expense; if this is the case you may need to do your research, then top up your funds with help from the likes of moneyboat.co.uk. You should always take the time to heed the warnings of such a course of action, of course, but it can help you out in a pinch.
“What if I can’t afford to tidy one month?”
Then don’t; if every penny is needed for your budget, then that’s where it goes. It’s important, psychologically as much as anything, not to let tidying becoming a dominant part of your budget. This is “rainy day” money, so it doesn’t have an immediate need, thus you can be more casual with it. And remember, even if you can only tidy a couple of pence, it’s still worth doing.
“Should I try it?”
Ask yourself: what’s the harm? It’s worth giving a go as you’re still going to be in control of the money, and you can stop anytime you want. If you’re looking to fund an emergency pot, it might just be the best decision for you.