Ready for a rainy day? Time to get a financial umbrella
Sunday 15 November 2009
More than a quarter of British families have no savings or investments to fall back on in times of emergency, according to new research from Abbey. With unemployment nearing 2.5 million and set to go higher, being one wage packet away from the breadline is a sobering thought.
"It is vital to have a contingency fund to cover the uncertainties of life. Without this, it is all too easy to fall into debt through using a credit card or running up an overdraft," says Philip Pearson from Southampton based independent financial adviser (IFA) P&P Invest.
The big question is: how much should you put aside? As a guide, experts recommend keeping at least three times your net monthly income as a cash fund, taking all mandatory expenses into account including food, mortgage or rent payments, utilities, medical bills, transportation and insurance. This is merely a guideline, however, so the amount you should put away will depend on other factors.
"Do you have one household income or two? Do you have any ill health insurance in place? Are you paying for private schooling? How big is your mortgage?" asks Jason Witcombe, from IFA Evolve Financial Planning.
Once you have a good idea of what you would need to live on for at least three months, it's time to decide where to put your money. By its very nature, a rainy-day fund must be liquid and stable enough to allow easy access.
Unfortunately, the best deposit returns on the market are offered by fixed-rate investments such as the five-year bond from Skipton Building Society, which pays 5.35 per cent on deposits of at least £500. By comparison, the top no-notice account from West Bromwich Building Society pays a far less rewarding 3.35 per cent on deposits of £100 or more and also includes a 0.6 per cent bonus until 30 December 2010.
The top branch-based savings accounts paint a similar low-rate picture. Nevertheless, these accounts can make a useful part of a rainy day-fund because you can turn up in person at a branch and use your passbook to access your money. The market leader is currently a 3.35 per cent account with West Bromwich. A regular saver can offer you a better balance between high interest and access. These have the added bonus of forcing a more disciplined approach to saving, and you can set them up using a standing order.
"Those savers looking to start a savings safety net should consider opting for a regular saver. Rates are higher than on a standard savings account as how much you can invest each month is restricted," says Michelle Slade from financial information firm Moneyfacts.
Buckinghamshire Building Society holds the top spot for regular saving with its Chiltern Gold Mine account, paying 5.1 per cent, but this does not allow withdrawals. Norwich & Peterborough Building Society pays 5 per cent and allows one withdrawal a year.
It's also a good idea to use up your tax-free ISA (Individual Savings Account) allowance. You can save up to £3,600 in a cash ISA each tax year (£5,100 for the over-50s) and from next year, that increases to £5,100. Better rates are offered on fixed-rate ISAs which generally don't allow access without incurring an interest penalty.
Independent Partners: See how much you could save by switching credit cards. Compare now
arts + entsThere were towering ideas, some scintillating performances and revelatory grooves... our writers pick out their personal highlights
elephant appealThe first 23 lots in our charity auction have now gone. But there are 22 more still up for grabs
elephant appealPrince William signs up for our charity appeal
peoplePrepare to be entranced by worms as the molecular biologist gets ready to give the Royal Institution science lectures
elephant appealSo says man jailed for cutting off dead elephant's tusks
booksWe examine the best titles for teens
voicesPeople moan that Christmas is too commercial, the spirit lost. But it is a time to over-indulge, and always has been, says DJ Taylor
scienceResearchers teach border collie to understand sentences using more than 1,000 words
booksA Christmas story in six parts
travelWill high-value tourism help the workshops of this Renaissance city?
food + drinkA trifle without custard? Surely not! Nonsense – and here’s three to finish your festive meal that prove it
Geoffrey Macnab does not like the comedian's big screen debut
- 1 Top PR exec Justine Sacco under fire for sending racist tweet before flying to Africa
- 2 French pub fined €9,000 after customers returned empties to bar - because it's 'undeclared labour'
- 3 Sun will 'flip upside down' within weeks, says Nasa
- 4 The publisher who played with fire: the battle for control of Larsson's £30m legacy
- 5 Police seize possessions of rough sleepers in crackdown on homelessness
- < Previous
- Next >
iJobs Money & Business
£59999 - £80001 per annum + Benefits: Pro-Recruitment Group: A Top 10 firm in ...
£50000 - £75000 per annum + benefits + bonus: Harrington Starr: Project Manage...
£60000 - £90000 per annum + benefits + bonus: Harrington Starr: Business Analy...
£Negotiable: Citifocus: High calibre individual with institutional client serv...
Day In a Page
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000
A two-bedroom flat with an open plan kitchen and two balconies, close to Arsenal station
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A Grade II-listed home with six bedrooms, secluded landscaped gardens and views across Hadley Green
A Grade II-listed mansion with two apartments and a cottage, near Gretna Green
A three-bedroom Grade II-listed mews house with vaulted ceilings and roof garden
A spacious Grade II-listed family home with annexe and equestrian facilities among four acres of land in Itchingfield
A four-bedroom home with exposed brick walls and open fires in the picturesque village of Northill
A Grade II-listed property with five bedrooms and unique tower, overlooking Hastings Old Town
A charming five-bedroom detached family home, set within half an acre in Kew
A two-bedroom maisonette set on the top two floors of a period building, close to Kentish Town Tube.
Take advantage of the extra space provided by former stables and outbuildings at this five-bedroom farmhouse.
This three-bedroom Victorian terrace is near to Queen’s Road Peckham station, Nunhead station.
A five-bedroom modern house with terrace, swimming pool, Zen treehouse and large carp pond
An unexpected gem with four bedrooms, remarkable vaulted reception and a galleried study area
A five-bedroom house in one of Lymington's most sought after tree lined avenues, moments from the marinas and sailing clubs
A grand early 19th century B&B close to the historic harbour, with four en suite bedrooms
A four-bedroom, 17th century home with walled gardens, a landscaped terrace, cellar and open fires
A six-bedroom house with five bathrooms and four reception rooms spread over 4,000sq ft of luxury living space
A stunning three double-bedroom apartment with two decked terraces in the exclusive gated community, Bromyard House
A 10-bedroom period, family home amid beautiful surroundings in the centre of the Wentworth Estate in Longcross village
A stylish three-bedroom apartment with two bathrooms and private landscaped garden, moments from Fitzroy Square
A Grade II-listed Elizabethan barn with landscaped gardens, exposed elm beams and four bedrooms, all with lovely views
A six-bedroom family home, dating back to 1280 with four reception rooms, barn, swimming pool and tennis courts in Harwell
A spacious two-bedroom flat, refurbished to a very high standard with private landscaped garden, close to Kentish Town station
An exceptional two-bedroom apartment with balcony and underground parking in the centre of Richmond
A one-bedroom, luxury, duplex apartment in the grand landmark building, Imperial Hall
Run a fabulous boutique shop, live above it in a one-bedroom flat and let a second one-bedroom flat that comes part and parcel
A Grade-II listed, thatched cottage in Hundleby village, with five bedrooms, a coach house and three and a half acres
A spacious two-bedroom flat in the heart of Hoxton Square with wooden floors and roof terrace
A five-bedroom family home with stunning pool and gym complex set among two acres of land
A six-bedroom period house with heated swimming pool and a separate two-bedroom annexe cottage in Townlake, £795,000
A spacious and contemporary two-bedroom flat arranged over three floors, with garden patio close to St George Square, £600,000
A one-bedroom flat in a beautiful Regency building opposite the beach in Kemp Town, £190,000
A two-bedroom flat with London skyline views close to Surrey Quays. £395,000.
A seven-storey tower with three bedrooms and a stunning roof terrace. Guide price: £850,000.
A 16-bedroom country pile with nine reception rooms, four self-contained flats and a 13th century Peel Tower. £850,000.
A classic six-bedroom Victorian Manse house 10 miles from Edinburgh. £495,000.