Reasons Why It’s Important To Have A Contingency Fund

As soon as you start your working life, it is important to start thinking about building a contingency fund. And it’s even more crucial when you get on the property ladder. It’s not the most fun thing to talk about because it’s much more enjoyable spending your money on shoes and clothes and pretty things for your home! But if you do get into trouble financially, having a nest egg will help reassure you when you need to make an expenditure that you hadn’t calculated for.

Contingency Fund

How Much Should I Save?

As a general rule of thumb, your contingency fund should have at least three months of your salary saved up into the account. Obviously, it’s not possible to out all this in at one (we still need to buy the shoes we talked about earlier)! But if you start thinking seriously about saving, from the day you get your first pay cheque, you should be able to steadily build up your fund. After working out your bills, mortgage/rent, food shopping, and socializing money, put a little away each month for your emergency savings.

Things That Go Wrong In The House

It’s always an exciting time when you become a homeowner. You’re not throwing money away on rent anymore, and you own a beautiful property that you can make your own. But with owning a home comes the responsibility of fixing things when they go wrong. You may need to call in an electrician to fix old or frayed wiring. It might be that you need to call in a professional to use a CCTV drain camera to find the problem that is causing drainage and sewer issues. It could be that your washing machine or dishwasher breaks and needs replacing. These are all things that cost money that you were not expecting to pay out. Hence, you use your contingency fund for them. Thus keeping on top of your regular finances and not getting into debt when you have an extra big spend to make.

Things That Go Wrong At Work

A contingency fund is also a safety net if things go wrong at work. It may be that you are made redundant, you get sick, or you simply are so unhappy in your job that you need to leave. A contingency fund can bridge the gap between now and the time it may take to find a new job. Some people use their contingency fund to start their own business if they decide they want to work for themselves. Obviously, you need to be sensible about using your funds in this way and make sure you can build them back up again. But having the security of this extra emergency money eliminates some of the stress if things go wrong at work.

Renovating Your House

It may be that you also want to invest some money into renovating and making your house more beautiful. Perhaps you want to install double glazing on the windows. Or you would like to turn the spare room into an office space. Or maybe you need new carpet or fancy indulging in stylish wooden floors. It’s important to keep our house looking fresh and chic, and a contingency fund can help when you want to make super stylish interior changes. And don’t forget that these can be an investment or the future as a new interior design can add value to your property too.