Brits assess their emergency savings

Britons believe the average amount each person would need to ensure peace of mind to cope in an emergency is £5,368.70 - the approximate equivalent of four months' of the average person's take-home income, according to the latest NS&I (National Savings and Investments) Savings Survey.

However, nearly a third (32%) of people said that they did not have savings set aside to help them deal with any unexpected events. Over a fifth (22%) said they are putting money away for an emergency, but are not keeping this money separately from their main account - making it difficult to keep their emergency funds separate, and opening themselves to the temptation to use it for everyday expenses.

The research suggests a complacent attitude lies behind this risky behaviour. Nearly a third (32%) of people said that they had given a little thought to how they would cope financially with an emergency, but believe that life is too short to worry about such things. For those people without an emergency fund, almost one in ten (8%) stated they had not thought about having one, while 7% have considered it, but do not expect to be affected by an emergency in the near future.

Dax Harkins, NS&I's senior savings strategist said, "We all face the possibility of situations that we simply have no control over - so it's essential that we are all prepared for any emergency that will require immediate access to money, and ensure we are saving enough to cover us in a crisis.

"Last month we published the results of our winter quarterly savings tracker which showed that the main reason the population was saving was to help them cope in case of an unexpected emergency (56%). While this is encouraging, our survey reveals that almost one in ten (9%) Britons think they could only support themselves for one month if an emergency arose - even though the recommendation is to set aside about 3 to 6 months of living expenses to cover any situation."

Even those people who have emergency funds are unsure how to manage them properly. One third (33%) of those with emergency savings had dipped into this fund to buy non-essential items. While a minority (5%) regretted it and were determined not to misuse their money again, just over a fifth (22%) said they saw no harm using this safety fund for everyday items, and would be prepared to do it once more.

In a sign of further confusion, Brits would rather go into debt than actually rely on their emergency cash, as 17% said they would rather take out a loan, and 12% would take out a new credit card if they unexpectedly needed more money. Just over half (53%) said they would try to cope by working longer hours or taking on a second job.

Nearly two fifths (39%) of people also said that their definitions of financial emergencies have recently changed. Nearly a fifth (19%) say that in the current uncertain economic climate, things they previously did not think were important now always seem like an emergency - while 20% appear less concerned, saying events they previously thought of as an emergency now seem less threatening.

"Confusion seems to reign for Britain's savers as to what counts as a financial crisis, how to save for such an event, and how to manage safety funds." Harkins added. "Given the current climate, it is even more important to think about this and to start saving money in a separate and easily accessible fund, just in case the unexpected should occur."