Make sure you have savings for an emergency

An independent financial advisor is urging consumers in the UK to make sure that they have some savings put aside to serve as a ‘financial cushion’, which can then be used in the case of emergencies.

The advisor, from Christie Scott, states that consumers should always have at least three months worth of wages put aside in savings to fall back on should the need arise. This is particularly important for the self employed, who may find that income for some months is far lower than for others, and therefore may need extra money to subsidise their income now and again.

The firm Christie Scott has pointed out that in order to ensure that there is money in the savings account for emergencies consumers will not necessarily have to dramatically cut down on their social life and spending. Simply making some basic cutbacks and reassessing expenditure could help to top up any savings in order to try and get the balance up to three months worth of salary. Consumers are urged to look through their monthly income and outgoings in order to try and direct some extra cash into savings each month.

The financial advisor stated that in some cases people believed that savings was only worth it if interest rates were high, but this was not necessarily the case.

She stated: “More people may be inclined to save when interest rates are higher. When rates are low some people see little point. Most don’t understand the concept of compound interest – meaning that even low interest rates added steadily over time will make a difference.”

Research has shown that in the second quarter of last year the average amount being saved was £1376 per person, and this has fallen to £910 per person for the second quarter of this year.

Tom Smith
1st October 2007

Tags: interest, savings, self employed, emergency, average, salary, accounts

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