Once you’ve met your target amount for saving for an emergency fund, you might want to continue with the regular savings amount to fund other savings goals – as you will be used to this level of outgoings by now.
Get your emergency fund set up as soon as possible. Like with all savings it’s best to keep to what you can afford and make sure to save regularly. Work out how much you need to put aside, and set up a savings standing order for the right amount.
A good rule of thumb is to have three months’ essential outgoings available in an instant access savings account. If you spend £1,000 a month on mortgage or rent, food, heating bills and other things you can’t live without, you should aim for £3,000 in emergency savings.
Emergency savings are vital if you need to pay for an unexpected repair, or if you’re having a few months in an unexpected situation, such as losing your job or splitting up with your partner.
There are usually no limits on how much you can save in a savings account each year, and often the more money you put in, the higher the interest rate you receive. If you’ve used up your saving allowance on your ISA, you might want to open a savings account for any extra money you can save.
An ISA is an Individual Savings Account, where you pay no tax on the interest that you earn on your savings – you keep all of the interest. You can save up to £20,000 each tax year in an ISA, and the limits can change between tax years.
If you pay your money into a bank or building society, they’ll pay you interest on it. The two most common savings products are an Individual Savings Account (ISA) and a savings account. Each of them pays different interest rates.
The further in advance you plan your trip, the more time you will have to save for it. For expensive or special trips, consider asking family and friends to chip in to your travel fund in place of gifts for holidays or birthdays.
Know how much you will need for each aspect of the trip – transportation, housing, food, tips, activities, and all associated fees – and then plan extra for unexpected expenses.
Do a quick online search of approximate costs to travel to each holiday destination, keeping in mind expenses to travel, stay, eat, and play. You might take more time after choosing a holiday destination to find great deals on travel and hotel arrangements.