We all make plans, but sometimes things just happen out of nowhere. It could be a one-time cost like a broken down car or washing machine that you suddenly need to replace or fix. There are also unplanned life events that can have a much longer-term impact on your financial and mental wellbeing.
If money is tight already, these shocks can have a serious impact.
Having emergency savings and insurance to cover the unexpected can make you feel much more in control. Your situation may not enable you to prepare for every eventuality but being more aware, knowing what you can do if something happens and perhaps taking some small steps may be a big help.
Having emergency savings and insurance to cover the unexpected can make you feel much more in control"
Things to think about
Saving an emergency / rainy day fund
You may have thought about irregular but planned costs that come up throughout the year like birthday presents, Christmas, a holiday or the car MOT. But there will also be irregular but unplanned spending for emergencies like car repairs, a new washing machine or to pay your bills if you were unable to work for a time.
MoneyHelper recommends saving three months of outgoings like your rent, bills and debts, so you could cover your living costs if you were unable to work.
This may seem like a lot to save, but even a small amount stashed away is good to have for an emergency so you don’t find yourself short of money for essentials.
- Find out more about saving an emergency / rainy day fund.
- Use the savings calculator to find out how much you can or need to save.
- Use the MoneyHelper bill prioritiser to help you sort your bills and payments in the right order and tell you what you need to do if you’re struggling to pay before you miss a payment.
Insurance can be a good way of preparing for the unexpected.
You can have insurance for being unable to work due to illness, injury or redundancy. There is also critical illness insurance or life insurance which may be particularly important if you have a family.
There are other insurances like buildings and contents, travel insurance, pet insurance to name a few. You could also look at car recovery/rescue policies in case of a breakdown.
Not all insurance policies have the same terms and conditions, or cover the same things so price may not be the only reason to buy a particular policy. MoneyHelper has guides to all these types of insurance including:
- Whether you really need insurance
- How to choose the right cover for you
- How to get the best deal
You may also be offered insurance when you buy something. For example an extended warranty on a new washing machine, add-ons to policies like mobile phone insurance cover or you may be offered payment protection insurance when you take out a credit card or loan.
With all of the above in mind, you might benefit from receiving financial advice. A financial adviser will talk to you about the bigger goals such as your retirement savings and investments for example – and also help you ensure that your financial provisions are tax-efficient.
Not all insurance policies have the same terms and conditions, or cover the same things so price may not be the only reason to buy a particular policy"
You can find a financial adviser in your local area at unbiased.co.uk. Advisers usually charge for their services.
If something has already happened, and you don’t have enough savings to cover this unexpected cost, you may need to borrow money.
There are lots of different borrowing options out there and some can end up being very expensive to pay back. From your bank or credit card, to credit unions or even your employer – its worth weighing up which routes may suit your circumstances best.
Other unexpected life events
So far we’ve looked at some steps you can take now to be better prepared for unexpected problems. But sometimes big life events can also be unexpected. Here are some useful links to getting support.
Finding care for a loved one
It can be such a worry when you or someone important to you needs extra help, such as an elderly or frail relative. But you don’t have to cope alone – there are several services that can support you.
you don’t have to cope alone – there are several services that can support you"
Divorce, dissolving a civil partnership and separation
Ending a relationship may not come completely out of the blue, but the cost can have a big impact on your finances. There are legal costs but you’ll also need to think about how to divide your money, your home and how you look after your family on your individual incomes.
MoneyHelper has guides that can help you be prepared and if you are on a low income you may be able to get help with some of the costs.
The Citizens Advice website also has some very useful information including specialist helplines for men or women who may be victims of domestic abuse.
Sometimes redundancy is welcomed, especially if you’re ready to move on and there’s a good financial package on offer. But for many, redundancy is a shock, both emotionally and financially.
Your employer may offer free support for your wellbeing and to help you get ready to find another job as part of the redundancy package – so make full use of these if they are available to you.
Your employer may also have an Employee Assistance Programme (EAP) which offers free advice. If you have a Union, you may also be able to speak to them for help and support through the process.
If these are not available to you, we’ve put together a list of useful links and resources to help you.
The Government website has useful resources to help you understand your rights, claim benefits and cope with redundancy. They also have resources if you want to get another job and improve your skills or if you are no longer working because of COVID-19, and a list of jobsearch websites you could sign up to.
The Citizens Advice website also has information to help you understand your rights, especially if you feel your redundancy may not be fair or if you have been dismissed from your job.
Government Help for Households
The Government Help for Households site has useful information to see what cost of living support you could be eligible for:
- Help with energy bills
- Help with childcare costs
- Help finding work
- Income support
- Household costs
- Transport costs
MoneyHelper is part of the Money and Pensions Service.