The current situation has shown us that a high percentage of people do not have an emergency fund. This can lead to financial disaster and a reliance on government support.
Government support can be slow and for some people may not be applicable. The current crisis is therefore a wake up call for many who don’t have an emergency fund, as this will cause untold financial and mental stress and a dependence on others.
Hopefully the Coronavirus will encourage people to realise that as with personal hygiene, we also need to take control of our own personal financial situation. While having an emergency fund will not save us from these events, it will help us to overcome them financially without going bankrupt or relying on others.
For those with dependents the need for an emergency fund is even more important and the fund would need to be a minimum of probably 12 months salary.
So, what should you do?
The easiest way to create an emergency fund is to put aside a percentage of your salary every month until you have the amount of money you require.
It may also be possible to insure against redundancy and against sickness or ill health preventing you from working.
Other emergency options:
If you don’t have an emergency fund you maybe able to borrow against your property.
It is also possible sometimes to borrow against your investments or pension in certain circumstances.
You could also borrow against your credit card or get an unsecured loan but generally you would only do this as a last resort.
It is a reality that we are all likely to experience financial hardship at some point in our lives and hopefully, the current crisis will encourage people to act sensibly and save for these kind of events. So the next time this happens we'll all be better prepared.
If you're unsure about your current situation, emergency funds or anything else, reach out here.