Rainy day funds: when is it OK to dip into them?

The latest NS&I Quarterly Savings Survey out today reveals that over one in four Britons (27%) with an emergency fund have broken into it when they didn’t have to.

  • Only half of British savers (53%) think they have enough savings to cope in an emergency and nearly one in ten (9%) don’t think they need an emergency fund
  • One in four people with an emergency fund have broken into it when they didn’t have to
  • Essential home maintenance most common reason for dipping into a rainy day fund

The new research also shows that the average Briton is now saving £96 per month – an increase from £88 in the previous quarter.

The number of people who feel they have enough money in savings to cope in an emergency has remained broadly the same (53% in this quarter, compared to 52% in the last). Alarmingly, nearly one in ten people (9%) don’t think they need an emergency fund at all.

The research also asked savers with an emergency fund to state what reason they had dipped into their rainy day fund or what reasons they would consider appropriate. The top eight answers were:

  • Essential home maintenance (41%)
  • To pay bills (24%)
  • When losing a job (23%)
  • Home improvements (22%)
  • To go on holiday (18%)
  • To buy/rent a new house (12%)
  • Making an impulse purchase (7%)
  • To reward myself (7%)

While just over one in 10 of the younger age group (16 to 24 year olds) think that only a small amount – one weeks’ salary – needs to be saved to constitute an emergency fund (11%), experts generally believe that people should be saving at least three months’ of their salary to put together an emergency fund. However, only 45% of all of those surveyed have at least this amount put aside for such circumstances. Nearly half of men (48%) generally seem to think they have at least three months’ salary savings compared to more than two-fifths (42%) of women, but over a quarter (26%) of Britons who think the y need at least three months’ salary for an emergency fund don’t actually have enough to cope.

The survey shows that out of the 53% of those who think they have enough in savings for an emergency, two fifths (41%) wouldn’t touch that money unless it was a real emergency. 38% would only break into it if they were really struggling financially, whereas 13% admitted that they would dip into their fund whenever they wanted.

Furthermore, the research reveals that of those who feel they have enough money in savings to cope with an emergency, nearly one in ten (9%) have broken into their emergency fund and later regretted it. It is the younger generation aged 16 to 24 that regret breaking into their emergency fund the most (29%), while the majority (62%) of those aged 65 plus reveal they never break into their emergency funds.

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.”

Notes to editors

The most recent Lifestyle section of the NS&I Quarterly Savings Survey was conducted by TNS, among 2,489 British adults aged 16+ between 5th and 12th September 2013. The main survey has been running every quarter since winter 2004, and is a snapshot of how the nation is saving.