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Do you have an emergency fund?

1st October 2019

piggy bank, savings, emergency fund, deposit, bank, building society, account


In addition to the thousands of holidaymakers who’ve had their holiday dreams ruined by the collapse of UK travel agent Thomas Cook, there’s the arguably bigger and longer-term impact on their staff.

Driving back from a client appointment, I caught a BBC radio interview with a married couple that had both worked for Thomas Cook. It appeared that they had had good jobs with little financial worry until the sad demise of the company. 

Unfortunately, this couple now faced an uncertain financial future and it was heartbreaking to hear that, along with having to ask that their mortgage lender suspend their mortgage payments for a few weeks, they could no longer even afford to pay for their young daughters’ school trips.

Fortunately, in this case, someone at the school had arranged to pay for those trips which was a great act of kindness and one for which the couple were very grateful. 

From a financial planning perspective, however, it is obviously best not to have to rely on the generosity of others if financial disaster strikes. And, along with the need for insurance policies such as Income Protection, Critical Illness, and Life Assurance to protect yourself and your family in the event of serious ill-health or death, the traditional emergency fund should never be forgotten.

Ideally, you should have 3-6 months expenditure set aside in case of emergency and preferably this should be in readily accessible cash deposits such as a bank or building society accounts and I’d avoid the old-fashioned money-in-a-jamjar just in case of burglary. It doesn’t always have to be cash: so long as the money’s accessible, investments such as Investment ISAs are fine as a reserve, albeit with the caveat that there’s always the risk that the investment value might have fallen when you actually need to dip into them. Even a credit card (with sufficient available balance) is better than nothing.

Building up an emergency fund can take a while but it’s simple to start by using a regular savings account (which normally pay higher interest rates) to put aside a regular amount each month. Just ensure that you select one that allows penalty-free access should the worst happen. 

I heard today that some Thomas Cook staff, despite their own circumstances, have been volunteering their time and expertise to help customers who’ve been affected by the company failure. Apparently ‘pop-up surgeries’ have sprouted up in pubs and cafes where people are being helped to make claims, rearrange flights and generally to salvage some of their hoped-for holiday.  

Such dedication and generosity is really heart-warming and of course, we all hope that they’re able to get back on their feet as soon as possible.


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