Are you prepared for financial shocks?

Unexpected costs such as a broken washing machine or a leak in the roof are often expensive.

So it makes sense to have a bit of money put aside just for emergencies.

But according to research from Hodge Bank, one in five Brits aren’t putting anything at all into a rainy-day fund.

How to be ready for emergencies

If you have a pot of money set aside for emergencies, you can cover unexpected costs without resorting to borrowing or dipping into savings.

Figures from Hodge show that if they were hit with a surprise £500 bill:

• nearly half (45%) of 18 to 34-year-olds would need to borrow from family or friends to cover it
• almost one in five (19%) 45 to 54-year-olds would also need to borrow money
• nearly half (46%) would dip into their current account to pay it
• more than two-fifths (41.4%) would pay it on their credit card

That’s not sustainable, as you can never know when a financial shock may come, how often they might happen and how much they’ll cost you.

Financial shocks can also take many different forms.

The Hodge study found that car repairs are the most common unexpected cost that people face, with 37.6% finding themselves in this situation.

That’s followed by:

• home repairs - 30%
• vet bills - 17.2%
• emergency dental or medical treatment - 15.2%
• childcare costs - 8.7%

So it’s well worth being prepared just in case.

A good goal is to have enough saved to cover around three months of your living costs - things like rent, bills, food and transport. 

Even putting away a small amount into your rainy-day fund regularly could make a big difference if or when you ever need it.

Life doesn’t give much warning, so if you have a financial shock, such as losing your job or a sudden repair bill, having even a little bit of money put aside can take away some of the stress.