Time to save as unemployment soars

There are insurance policies that people can buy to protect their income if they are made redundant. In the current climate, they may be something people want to look long and hard at. Nobody’s job is safe regardless of what you think. Most people live month to month, which is dangerous as there is no backstop. If danger is in the horizon, batten down the hatches or take precautions to weather the storm because the state won’t look after you.

In an economic storm such as this, people need to think seriously about building up that rainy day fund. They should also look to take out protection in the event of losing their jobs. Because if you think it's bad now, things could be even worse by the end of the month. Job security is now less certain than ever, so whilst saving is difficult for many at the moment, people need to do whatever they can to squirrel some money away in case they are called in by HR. More widely, without an income, people can't get mortgages, so the Government's house building targets are futile.

Having enough savings set aside to cover 3-6 months' worth of household running costs is essential, irrespective of the economic climate. Whilst lenders will look to help in the short term, any arrangement agreed will have a detrimental effect on your credit file, making it harder and more expensive to obtain a mortgage in the future. There are unemployment insurance options to cover the mortgage payments for up to 24 months, but typically, they need to be in place for several months before any claim can be honoured. Speak to your mortgage broker about your options.

The key is always to have an emergency fund, ideally three to six months’ expenditure held in an instant-access account, such as a Cash ISA. However, I’m realistic and appreciate that for many people this can seem unachievable. As a minimum, people should aim to have at least a couple of weeks’ worth of spending money set aside, along with access to other funds, such as a credit card that isn’t already maxed out. If you do lose your job and have a mortgage, contact your lender as soon as possible — don’t wait until you’ve missed a payment. Lenders are generally understanding and can often agree a temporary payment plan or mortgage holiday to help you get back on track. Beyond that, it’s essential to think about how you and your family would cope financially if you were seriously ill or died. Subject to affordability, protection policies such as Income Protection, Critical Illness Cover and Life Assurance should all be considered. These provide vital financial security in uncertainty.

It may well be time to save for the expected recession caused by Rachel Reeves’ repeated fiscal incompetence, but you can’t ask a starving man to stock pile food. The cost of living and stagnant wage environment makes it impossible to arrive at a place of safety, at least when Reeves is driving the train.

This jobs data is a timely reminder to be prudent. The risk of losing your job is rising while the chance of finding another is falling. In a softening labour market, a financial buffer is essential. Aim for 3–6 months’ expenses in an easy-access savings account, and if you’re worried about your mortgage, talk to your lender early. They have flexibility if you act quickly. Protecting your financial stability now is far better than reacting when it’s already under pressure.

In the current climate, with job security looking increasingly shaky, having a financial buffer is more important than ever. Look for a savings account that offers easy access so you can get to your money in an emergency, and a competitive interest rate. Shop around - the best deals for these kinds of accounts are generally found with online banks rather than on your high street. It's vital you put your money into an account that is paying a rate that's higher than inflation - otherwise your money is losing real-world value.