Digital banking providers offer straightforward budgeting tools to help you manage your finances and make your money more accessible than a traditional bank. But why are emergency funds so important and how can you build one using your digital banking platform?
Why is an Emergency Fund Important?
In the UK it is estimated that 15% of the population have no savings at all, and over a third have savings under £1500.
As a rough guide, the Money Advice Service advises that you should have at least three months’ essential outgoings saved for a rainy day. This means if you spend around £1000 a month on rent, bills, food, heating and other things you can’t live without, then you will need to have around £3000 in your emergency fund.
Emergency funds are important because they give you some financial security when you experience unexpected outgoings or changes to your income.
But if you’re struggling to save in the first place, the last thing you want is to be lectured on why you should be saving more! That’s why we’ve put together some helpful tips on how to build an emergency fund using your digital banking platform.
Digital Banking Helps you to Save Like a Pro
When it comes to saving money, the trick is to set yourself manageable goals. Whether you save £10 a week or £100 – it doesn’t matter, as long as you stick to your plan, you’ll start to see the pounds pile up in no time. As an example, if you save just £3 a day, in a year’s time you would have saved £1,095.
Figure out your Expenditure
Now this is probably the hardest hurdle to overcome when trying to save as it requires you to sit down and reflect on your outgoings and create a budget (you can find free budgeting planners and templates online, you just need to find one that suits your needs).
If you’re not really into budgets, all you need to do is minus your regular outgoings from your income and see what disposable money you’re left with. You’ll be able to get this information from your bank statement or online banking.
Now you can put a plan in place on whether you need to cut back on any certain luxuries and decide how much you can afford to add to your emergency fund. However, if you’ve got any other expensive outgoings such as birthdays or a holiday you should account for these as well.
Once you’ve worked out your disposable income and how much you can afford to save each month, your savings journey can begin!
Turn your Spare Change into Solid Savings
Rounding up your debit card transactions is another great way to start your emergency fund and it’s quick and easy when you use your mobile banking app. This is an example of how it works:
- If you spend £9.10 in a shop,
- And round this up to the nearest pound, you will have £10,
- Now you need to calculate the amount of change remaining: (£10 – £9.10 = 90p),
- Meaning you should add 90p into your savings pot
Before you know it, this will start adding up – without large sums disappearing from your balance in one go.
Digital Banking as the Solution to Saving Money
Fortunately, the arrival of digital banking has revitalised the prospect of saving money. Banking providers are starting to align themselves with their customers’ needs by giving them the tools to begin their savings journey in an easy and manageable way.
If you’d like to learn more, visit our informative Saving and Budgeting guide and discover how you can start savings journey with Suits Me® today.