27% of Britons dip into emergency funds ‘unnecessarily’

More than one-quarter of Britons have used their emergency savings for frivolous reasons.

The latest NS&I Quarterly Savings Survey demonstrates how 27 per cent of consumers were happy to dip into their rainy day fund for something other than a financial emergency to the tune of £96 a month.

While this may seem like a harmless activity, individuals could find themselves in a difficult situation if they continue with the practice and then actually do have to call on the money because of unforeseen circumstances.

More than half (53 per cent) of those questioned feel they are adequately prepared to cope with a change in their personal lives, while nine per cent don't think they even need to bother setting money aside.

When asked what had forced them to use their savings, consumers gave a variety of answers. While 41 per cent had responsibly dipped into the fund for essential home repairs, 18 per cent went on a holiday and seven per cent made an impulse purchase.

Building up savings

John Prout, NS&I retail customer director, said: "We're all familiar with the expression 'saving for a rainy day' but it is interesting to see how many of us are actually doing this. And, when we are doing it, how many of us are prepared to dip into a rainy day fund when it is not really an emergency.

"By taking control of your finances, and if possible putting aside some money for a 'rainy day', you can protect yourself should anything unfortunate happen, and have peace of mind that you have your emergency fund to dig in to, in order to help cover the costs of any unforeseen circumstances."

Showing financial responsibility 

In terms of the 53 per cent who are comfortable with the amount of money they have set aside, 41 per cent said it would take a real emergency to convince them to use the cash, while 38 per cent would wait until they were struggling financially. Some nine per cent of those who have dipped into their savings admitted they later regretted making the move.

Perhaps unsurprisingly, young adults are the most likely to fall back on their emergency funds, as 29 per cent in the 16 to 24-year-old age bracket have done so, with over 65s (62 per cent) the least likely.

As a rule of thumb, consumers are told to set aside three months' wages so they are prepared for the unexpected, such as becoming seriously ill or being made redundant. Not only will this allow households to continue to function properly, it also stops them from relying on credit.

However, the research uncovered that only 45 per cent actually have this amount in their emergency fund, while ten per cent of 16 to 24-year-olds think one weeks' wages will be enough to see them through.

If consumers are struggling to make ends meet, they should seek out expert guidance in order to bring their situation under control before it is too late.

By James Francis