A HSBC manager has spoken out about the importance of keeping an ’emergency fund’ and has revealed how much money people should aim to set aside for one. Intended to help cover any emergency situations, such as a job loss or unexpected bills, emergency funds are increasingly popular – but they can vary from person to person.
HSBC’s website explains: “Building an emergency fund can help prevent you needing to borrow money or make difficult financial decisions in those moments, by giving you savings to fall back on. How much you need, and what an ’emergency’ is, will depend on your situation.”
However, a good rule of thumb is to aim to save at least three months’ worth of living expenses. In a video shared on HSBC’s TikTok account, a HSBC UK Personal Banking Manager named Rupi broke down how much it’s recommended to save and why.
In the video, a HSBC UK Relationship Manager named Gaynor asked: “How much money should you have in your emergency fund?” Rupi replied: “So they generally say you can have at least three to six months of your living expenses inside your emergency fund. Remember that this emergency fund is to save you from any shortfalls or surprises that life might throw at you.”
Offering some examples, Gaynor pointed out that this might include car troubles, unplanned travel expenses, and job losses. Rupi said: “Exactly, it would cover all them options for you.”
Gaynor added: “I also think for high earners as well, they typically have higher expenses, so having that solid emergency fund is really key for your financial plans.” Rupi agreed: “They have bigger responsibilities, so it is all about what your living expenses are and what you can do to cover them, and could you cover them comfortably for around about three to six months.”
In the caption, HSBC emphasised that saving an emergency fund can provide peace of mind. The caption said: “An emergency fund isn’t just a safety net, it’s a piece of mind. Here’s why you should consider one to cover any unexpected circumstances.”
The banking group shares tips on its website for anyone who needs help deciding how much they need or who wants to start saving. HSBC said: “It may take you a while to save up, but even a small emergency fund is better than nothing, so don’t be discouraged.”
It could be helpful to open a new savings account. HSBC explained: “You may want to open a separate savings account for your emergency fund so you’re not tempted to dip into it. Ideally, you want to be able to access the money quickly, if you need it – so you don’t want it to be in a locked savings account or invested.
“A good way to stick to your savings plan is to set up a standing order to move money into a savings account each month. If you schedule it for the day you get paid, you’ll lower the temptation to spend it.
“You can also put extra money into your savings account whenever you want. If you have money left over at the end of a month, why not add it to your savings?”