By definition, financial emergencies occur instantly and out of the blue. The most common examples of financial emergencies include repairing a car to be able to commute to work, replacing faulty white goods like fridges and washing machines, and medical expenses. But are you really prepared for these unexpected expenses? What if they hit you before your next payday?
How Much Does a Financial Emergency Cost?
Each financial emergency is different and will spring varied costs onto families. For example, buying a new white well to replace your old one will cost between £300 and £600. The cost of repairing a vehicle is around the same on average, while medical expenses vary drastically.
One financial emergency that was not mentioned above is losing employment. Losing a job is the biggest financial emergency of them all, and the costs can be staggering depending on how long you remain unemployed.
Is the Average Person Prepared for a Financial Emergency?
The cost of a financial emergency is not a concern on its own. It’s the ability to manage the costs in line with all the other regular expenses, such as utility bills, rent, mortgage payments, groceries, and all the additional costs we face each month.
A survey conducted by Shelter housing charity and YouGov found that almost 50% of people working in the UK would find themselves homeless if their next paycheque didn’t arrive.
This is why the Money Advice Service recommends that everyone should aim to keep three months of expenses tucked away in case you lose your job. Unfortunately, due to the current economic climate resulting from the pandemic, this is an unachievable reality for most families.
Ways to Deal with a Financial Emergency (with NO Savings!)
So, what can you do if you have a financial emergency but have not been able to save, just like many other families? There are ways to access short-term credit to overcome the immediate future. If you don’t want to ask for help from family or friends, you could consider:
- Consider an emergency loan – accessing an emergency loan during and after the peak of COVID has been heavily regulated. Yet, emergency loan providers like Wonga are still helping families to cope. You can read more about their emergency loan product here.
- Ask your bank for an overdraft – your bank account provider may be able to provide you with an overdraft facility or extend any existing overdraft. Always be aware of any fees attached to your overdraft.
- Credit cards with low interest – A third solution could be to take out a credit card and use it to get through the immediate weeks. Some cards will provide new users a period where they do not pay any interest, meaning if you are tactical about it, you could borrow for free.
These options are not suitable if you have lost employment unless you already have another job offer. If you have lost your job, you should prioritize speaking with your utility suppliers, banks, and mortgage provider to see what support is available.