Building financial resilience is a crucial step in securing a stable and secure future. It often begins with drawing up a budget to track exactly where your money is going. This fundamental task can uncover areas where spending can be reduced, freeing up cash for savings. Moreover, creating an emergency fund is vital, with the latest data indicating that 65% of individuals maintain a fund that can cover at least three months' worth of essential spending.
Insurance also plays a pivotal role in bolstering financial resilience. Whether it's income protection or life insurance, these tools help plan for ill health or the impact of a bereavement. Additionally, opening a Lifetime Individual Savings Account (ISA) can be an excellent way to save for purchasing a home, as the government offers a 25% bonus on up to £4,000 of savings each year.
Budgeting tools, often integrated into mobile banking apps, simplify tracking your spending. Meanwhile, the investment platform Hargreaves Lansdown provides a "savings and resilience barometer" every six months, measuring resilience as maintaining an emergency fund to cover at least three months' worth of essential spending.
"Building an emergency fund often starts with drawing up a budget to see exactly where your money is going. This should reveal the areas where you can cut back a little, to free up cash for savings." – Sarah Coles, a personal finance expert at Hargreaves Lansdown
The process of building financial resilience extends beyond immediate savings. Checking your National Insurance (NI) record at Gov.uk can reveal if you can make voluntary contributions to fill any gaps. This is crucial as the amount of state pension you will receive upon retirement depends on the number of qualifying years of NI contributions. For those who reached or will reach state pension age after April 2016, at least 35 qualifying years are usually required for full payment, and at least 10 years are needed to receive any pension at all.
"Generally speaking, the best preparation for your long-term future is to start saving as early as you can. Saving as soon as you start working, and before you start a family, enables small amounts of money to grow into larger sums over time." – Clare Moffat, a pensions expert at the insurer Royal London
Eligibility for certain state benefits also hinges on your NI record, making it essential to keep it updated. Furthermore, for those buying property together, it is crucial to ensure both names are on the title deeds and formally agree on ownership shares.
"Once you’ve freed up the cash, set up a direct debit to come out of your account and go into savings, before you have chance to absorb it into another corner of your spending." – Sarah Coles, a personal finance expert at Hargreaves Lansdown
Insurance serves as another layer of financial security. Income protection insurance, for example, replaces some of your income if you're unable to work due to illness or injury.
"Income protection is a type of insurance that replaces some of your income if you’re unable to work because of illness or injury," – Victoria Francis, the head of individual protection propositions at the insurer Aviva
Planning for long-term financial resilience involves more than just saving and budgeting. The Hargreaves Lansdown "savings and resilience barometer" underscores the importance of having an emergency fund that covers essential expenses for at least three months. This benchmark serves as a guide for individuals striving to achieve financial security.
Incorporating saving strategies early in one's career can significantly impact one's financial future. Starting to save early allows small amounts of money to compound over time, growing into substantial sums. It's important not to assume bills are set in stone; regularly reviewing and negotiating them can yield significant savings.