Savers need to put more away for emergencies

The director of retail consumers for National Savings & Investment said few people were saving enough, and those who were have been dipping into their rainy day funds to meet short-term needs.

Data from the latest NS&I Quarterly Savings research, found that only just over half of British savers, 55 per cent, think they have enough savings to cope in an emergency.

Meanwhile one in 10 consumers said they do not think they need an emergency fund.

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Among those who do save, NS&I data revealed that more than half failed to meet the general rule of thumb to put away at least three months’ salary.

The data found that only 48 per cent of men and 42 per cent of women said they have reached that guideline.

The research also revealed that essential home maintenance and paying bills were the top reasons savers had dipped into their emergency funds.

Top reasons for dipping into the pot

Essential home maintenance 41%

To pay bills 24%

When losing a job 23%

Home improvements 22%

To go on holiday 18%

To buy/rent a new house 12%

Making an impulse purchase 7%

To reward myself 7%

Adviser view

Pete Matthew, director of Cornwall-based Jacksons Wealth said: “An emergency fund should contain three to six months’ salary equivalent, ideally.

“If there is debt in the household, people should follow these steps: build a starter emergency fund of £500 to £1,000, then pay off debt, then bolster the emergency fund so they have three to six months’ salary.

“Home maintenance is sometimes an emergency, of course, but most often it is a planned expense, so it should be budgeted for accordingly.”