Consumers should put aside at least three months salary
April 18, 2008
Independent financial advisors in the UK are urging consumers to ensure that they have some savings put aside for emergencies, stating that consumers need to put aside the equivalent of at least three months salary wherever possible in order to cover a range of eventualities and possibilities. Consumers are advised that they need this sort of ‘financial cushion’ in order to protect them should unexpected emergencies arise. Experts are advising that this is very important for those that are self employed, as they may need the cash to subsidize their wages in the event that they earn far less than they expected to one month.
One financial advisor stated that it was important for consumers to get out of the mindset that it was only worth saving money when interest rates were high, stating that compact interest could make a big difference and could help savings to grow. She stated: “More people may be inclined to save when interest rates are higher. When rates are low some people see little point. Most don’t understand the concept of compound interest - meaning that even low interest rates added steadily over time will make a difference.”
According to these advisors, consumers needn’t make huge changes in order to try and put some money aside for emergencies. Making a few cutbacks to social life and luxury expenditure can help consumers to save a surprising amount each month, and this can then be placed into a savings account with a decent interest rate, and left to accrue interest until it is needed for an emergency. Consumers should go carefully through their income and expenditure to see whether they can make cutbacks and try and put some extra money aside each month.
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