An emergency savings fund is advantageous for anyone, but for immigrants, it can be an essential safety net in case of unexpected financial hardship. While moving to the UK is attractive thanks to its higher wages and good standard of living, immigrants may face particular challenges due to initial relocation expenses, needing to support family back home, or unexpected costs related to gaining legal residency.
It might be tempting to spend your entire salary on getting settled into your new home or sending money to family. However, setting a little aside each month in a “rainy day fund” could save you a lot of stress in challenging times. At Remitly, we support UK immigrants by providing practical financial planning tips so you can build your emergency savings even while managing daily expenses.
Building your emergency fund
An emergency savings fund goes beyond putting your extra change in the piggy bank. It’s a financial safety net to protect you from life’s unexpected twists and turns. Building an emergency fund is a fairly straightforward process.
Calculate how much you need for emergency savings
Many financial experts recommend following the “3-6-9 rule” to determine how much you should set aside:
- You should have 3 months’ worth of wages saved if you rent your accommodation, have no dependents, and receive a stable income, especially if you have an additional safety net to count on, like family support.
- For homeowners, parents, or households with two incomes, keeping 6 months’ worth of wages in savings is recommended.
- Meanwhile, 9 months’ worth of wages is best for freelancers, self-employed individuals, or those with unpredictable income.
These guidelines offer a basic structure to help you figure out how much to save. However, adjust your plan based on your personal financial situation and how much risk you are comfortable with.
Steps to create a six-month emergency fund
Building a six-month emergency fund may seem overwhelming, but planning carefully and breaking it down step-by-step can make the process more manageable:
- Set a clear goal: Determine your take-home wages after tax and multiply by six.
- Understand your finances: Create a budget by calculating your monthly outgoings, then separate them into essential spending and nonessentials.
- Cut unnecessary expenses: Instead of buying an extra item of clothing or splurging on a night out, try living on a little less and redirect non-essential spending toward savings.
- Automate savings: Now that you know how much you can save each month, put that in a dedicated place so you don’t spend it. Many banks offer an automatic monthly transfer to a savings account, meaning you don’t have to remember to set it aside yourself.
- Boost income: Think of ways to bring in a little extra pay, such as working side gigs or selling things you don’t use anymore.
- Use windfalls wisely: If unexpected money comes in, send it directly to your savings instead of throwing a celebration.
Once you set a realistic monthly saving goal, you can calculate how long it will take you to reach your target. If you’re consistent in your savings, you’ll watch your fund gradually grow.
Prioritise savings in your budget
The key to success when building your emergency fund is to prioritise saving. Setting aside that extra cash month after month Isn’t easy, especially when you have other financial obligations. But treating it like a non-negotiable expense, just as important as rent or utilities, will ensure you keep saving.
Here’s a good tip for consistently meeting your savings goals: take the planned amount out of your main account immediately after you receive your monthly paycheck. This way, you can’t spend it accidentally on something else and end up with nothing left over at the end of the month.
Keeping your emergency fund safe
Now that you’ve established your monthly saving goal, it’s time to find a safe, secure way to store your savings.
Best savings accounts in the UK
Keeping your cash under your mattress is definitely not the safest place. Worse, you miss out on earning interest on your savings. An easy-access savings account will ensure your money grows at the best rate possible, but allow you to make withdrawals when you need it.
Many savers miss out on earning more by sticking with their current bank. Take your time to learn about different banking options. Shopping around can help you make the most of your savings.
Alternatives to savings accounts
Are you looking beyond traditional savings accounts? Here are some alternative ways to keep your savings safe while growing your money, each with its own benefits and drawbacks:
Credit unions
Credit unions are nonprofit, member-owned cooperatives that pool savings and offer financial services.
Pros:
- Become an owner in a community-based financial organisation.
- Access loans at better rates when needed.
Cons:
- Low or no interest, but yearly profits are shared among members.
Premium bonds
On the other hand, premium bonds are government-issued financial instruments.
Pros:
- Tax-free prize-based earnings.
- Money can be withdrawn anytime.
Cons:
- No guaranteed interest.
- Lower average returns than high-interest savings.
Individual Savings Accounts (ISAs)
ISAs are a unique type of savings and investment account available in the UK.
Pros:
- Tax-free growth on savings and investments.
- Wide variety of options, including cash and stocks ISAs.
Cons:
- Some ISAs have withdrawal restrictions.
- Investment ISAs carry risk, so they may not be the best option for your emergency fund.
Keep in mind that each option suits different financial goals. Only choose to invest in stocks if you are willing to accept a certain amount of risk.
How to access your funds easily
After reviewing the different options for where to keep your emergency fund, your biggest priority may be to keep it somewhere you can access at any time. In this case, a normal checking account could be an option. It will have lower interest rates, but no restrictions on withdrawals or spending.
However, deciding where to keep your money is a very personal choice that will depend on your personal circumstances and preferences.
Sources of emergency money in the UK
Despite our best efforts, we can’t always be prepared for disaster. What happens if misfortune strikes before you’ve had time to build up your emergency fund, or your savings can’t cover the costs incurred? Luckily, there are other sources of help available in the UK.
Where to borrow money
- Credit unions: Member-owned alternatives to banks that offer low-interest loans, savings support, and financial advice. You may need to join and save first before borrowing.
- Government schemes: Some government programmes provide emergency loans with fair terms. Check local options for quick, low-cost borrowing.
- Family and friends: Consider asking a loved one for financial help. Borrowing from friends and family can be interest-free, but it may strain relationships. Transparency and open communication are key.
- Avoid payday loans and high-cost credit: These options come with steep interest rates and fees that can create long-term financial problems.
Government assistance programmes
- Universal Credit: A monthly payment for low-wage individuals and those out of work or unable to work. Eligibility depends on income, savings, and residency in the UK.
- Jobseeker’s Allowance (JSA): Financial support for job seekers who have paid National Insurance contributions. Available for up to six months, provided you actively look for work.
- Local council assistance: Councils offer welfare schemes, including cash grants, food vouchers, and furniture aid. Availability and rules vary by location—check with your local council for details.
Charities and private trusts
- Turn2Us: A national charity offering grants and practical support for those facing financial hardship.
- Trust funds: Various organisations provide financial aid for household bills and essential expenses. Examples include Charis for utility bill support and the Energy Saving Trust, which helps with energy costs and home improvements.
- Specialised support in Scotland: Find programmes that offer targeted assistance in Scotland. For example, Home Energy Scotland funds grants for heating and insulation. Meanwhile, the Royal Society for the Support of Women in Scotland provides financial aid for low-wage women over 50.
Further financial assistance options
Besides the support offered through public services and reputable bodies, numerous other avenues exist for managing financial emergencies in the UK.
Help and financial support resources in the UK
If you need financial advice or assistance, seek guidance from these trusted organisations:
- StepChange: Provides free, confidential debt advice and a range of solutions to help manage finances.
- Citizens Advice: Offers advice and useful content on budgeting, benefits, and debt online or in person.
- MoneyHelper: A government service that provides practical tips on managing money, from budgeting to saving.
- Banks and credit unions: Many UK banks offer free financial advice and debt management services.
These resources can guide you through tough financial situations with expert advice and support.
Access support from your home country
If you find yourself facing financial difficulties while living in the UK, there may be support available from your home country. Many countries offer consular assistance or financial aid for their citizens abroad. For example, some embassies provide emergency financial help in the form of loans or grants for citizens who are in distress.
Additionally, some countries maintain social security agreements with the UK. In that case, you may be allowed to access benefits or healthcare support from your home country while residing in the UK. Your embassy may even provide assistance with repatriation if needed. Reach out to your embassy for specific guidance on your options.
Secure your financial future
Building an emergency savings fund is an important step towards financial security, as it provides a safety net during unexpected hardship. Immigrants may face additional challenges, such as limited access to local credit or support networks, making this safety net even more essential. An emergency fund offers peace of mind. With it, you can manage financial emergencies without relying on high-interest loans or borrowing from friends and family.
And if you’re struggling, there are many resources and support networks available to assist you in the UK, including government programmes, charities, and financial institutions. Don’t hesitate to reach out for help when needed; you don’t have to face financial uncertainty alone.
FAQs
What are the best accounts in the UK for an emergency fund?
The best accounts for an emergency fund in the UK include easy-access savings accounts, which offer quick access to your money when needed. Some popular savings accounts offer interest rates up to 5.12%, but be mindful of withdrawal conditions.
How much should you have in emergency savings in the UK?
Experts recommend saving at least three to six months’ worth of living expenses for emergencies. This amount provides a buffer in case of unexpected stressors like illness, job loss, or urgent repairs.
How do I get emergency money in the UK?
You can access emergency money through savings accounts, credit unions, or government programmes like Universal Credit or Jobseeker’s Allowance. Additionally, local councils and charities may offer short-term support in times of need.
Are there special benefits available for refugees?
Yes, refugees in the UK may be eligible for financial assistance, including Universal Credit, housing benefits, and support from charities. Local councils may also provide specific programs to help refugees settle and meet basic needs.
