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What is a safety net?

A financial safety net is an amount of money you have put away for unexpected, one-off expenses.

It’s typically around £500 but, depending on your circumstances, it could be up to £1,500 or more. A financial safety net may help you pay for an unexpected expense, such as a car breakdown or small home repair.

It’s different to an emergency fund where you save 3-6 months’ worth of living expenses. An emergency fund is for larger financial shocks, such as losing your job.

Why do you need a safety net?

Small unexpected costs can happen from time to time. These can include:

  • a broken fridge

  • a faulty boiler

  • an unexpected, or particularly large, bill

While there may not be much you can do to avoid the cost, it’s possible to prepare so it doesn’t put you under additional financial stress. 

If you don’t have money set aside and something happens, it may mean you have to borrow money through an overdraft, loan or credit card. This isn’t necessarily a bad thing, but you could end up paying interest and it can ultimately cost you more.

Where should you keep your safety net?

You want to be able to dip in and use the money whenever you need to. So, it’s important the money is accessible, rather than in a fixed-rate savings account or investment.

There also shouldn’t be a charge for accessing it. However, you don’t want your safety net to be too accessible. For example, if the money is in your current account, you may be tempted to spend it.

You may find it’s a good idea to keep your safety net in its own savings account that you’re able to access whenever you need.

Find out more about easy access savings accounts.

How much do you need for a safety net?

This is up to you, but £500 could be a good goal to start with. Our savings goal calculator could help you see how long it’ll take you to reach your target amount, so you can work towards a timeline.

Ideally your safety net will be large enough to cover expenses like those listed above. But you don’t want it to be so large that it’s preventing you from achieving other goals. Once you have your financial safety net, you may want to consider building an emergency fund and ways to grow your money.

When should you use your safety net?

It can be useful to set some guidelines around when you would or wouldn’t dip into your safety net – especially if it’s to cover other people as well as yourself. You can’t predict the future, but you can list out some examples of when it may be suitable to access the money. 

Having this outlined can prevent you from using the money for something that may not be essential, like a couple of new t-shirts a few days before you’re paid.

What next?

You may want to look at your budget to figure out how much you’ll be able to save each month to build your safety net. 

If you’re struggling to put money away, or you want to reach your target amount faster, there may be some ways you can cut back on your spending and save money.