Your Emergency Account
In an ideal world, when you buy a house you keep a little money to the side so that if something goes wrong early on (like a hot water cylinder not working) you can just sort it. But this isn’t always the case when you are trying to reach deposit requirements.
Have some money put aside somewhere gives you confidence.
Confidence that when crap hits the fan you will be okay.
Lets face it, life happens – the car breaks down, your teeth need work, a family illness requires you to travel.
Having some short-term emergency savings helps to solve this, and allows you to fund these things without having to use debt.
Don’t have any and wondering where to start:
- Go through your house and sell everything that you no longer need. You’ll be surprised at what you own that don’t need!
- This is the first port of call to save into once you have setup your Living and Spending account. Direct everything here for a bit.
How much do you need?
- The more the better.
- A lot of advice is for 3 months of living costs.
However, three months living costs is a significant sum of money! So even having $1-2k put aside somewhere for that rainy day will help you significantly.
What should you do with the money?
- Once you have a home loan, and use an offset loan – sit it in an account that off-sets the home loan. Label it “Rainy Day” so you know what it is, and you get a second benefit, it lowers the interest you pay on your home loan.
- For now, I recommend finding a high interest online savings account at a different bank to your living and spending account.
Why?
- Having it somewhere else removes the temptation to spend it! Out of sight, out of mind.
- Banking apps are a great invention for convenience, but they also encourage you to spend as you can always see your funds!
It’s really good if you can keep these funds out of your home deposit, so that if something goes wrong with the property after you buy it (murphy’s law), you can fix it without having to tap the credit card.