It can be wise to put money by in case you need it for an emergency. This could be if you suddenly need to replace a white good, need new school uniform for your children, run out of money for food before pay day or have a bill that you were not expecting. Many people will have some money put aside to cover these sorts of things, perhaps in a savings account. However, a savings account may not be the best place to keep it because it can be tempting to spend it as it is easy to get hold of. It probably will not earn a lot of interest there either because interest rates are so low.
A pre-paid credit card is a good way to save the money and you will not be able to spend it if you leave the card somewhere where it cannot easily be accessed. Then if you need to buy something in an emergency, you will have the money on the card ready to spend. Most places will take payment on a credit card and you will be able to therefore use it to pay for something you need in an emergency.
Tuck Money Away in a Savings Account
Another way to hide the money so that you do not spend it is to put it in a savings account with a notice period on it. This means that you must give a certain amount of days’ notice before you can get the money out. These accounts will let you have the money in an emergency, but you will have to forfeit interest as a result. This means that you will not want to do this unless you really need the money, and it is a real emergency.
You may wonder how it will be possible to build up an emergency fund. You will need to commit to putting a bit of money aside each month towards it. Every time you get some income you should put a bit of it into your emergency fund. Some people do 10% and some do more and others less. Decide how much will be the right amount for you and then make sure that you put the money aside first. If you wait until you have done some spending and see if there is anything left to save, there will not be. If you save first and then spend out of what is left, you will not be able to spend the money that you need to save.
It could take time to build up a decent emergency fund. However, it will build up if you commit to saving some money each month. Even a small bit at a time is better than none. As you get used to saving money, you may find that you can save more by cutting back on your spending. You may also see your income increase, perhaps through a pay rise, new job or earning extra money in your free time, so you will be able to save even more money.