Life doesn’t always go to plan, and unexpected costs, no matter how big or small, can cause serious problems. If you‘re worried about the cost of surprise bills, emergency savings and more, you’re not alone. We surveyed 2,000 adults in the UK and found that unexpected costs don’t just drain savings, but they also leave people feeling anxious, panicked, and can take months to financially recover from. Whether it’s a new boiler or a new set of tyres, we’ve taken a deep dive into how Brits cope when things don’t go to plan and how to prepare yourself for future emergency costs.
Financial impact
Unexpected costs can have a big impact on our wallets. The average Brit has spent £1,590 over the past two years on unplanned bills. More notably, one in 10 people in the UK have spent over £4,000 over the past couple of years - enough to deal a significant blow to the savings and spending habits of most people. The impact of these unexpected costs is long-lasting, too.
Who’s still recovering from unexpected expenses?
- Overall 17% of people asked are still recovering.
- The age group most likely to be recovering are 45–54 year-olds at 30%, while the average is almost half, 17%.
- Looking at the men and women – 12% of men are still recovering, but this goes up to 22% with women.
Understandably, any unexpected bill, especially if you budget or if you’re already impacted by the cost-of-living crisis, will have a significant financial impact. Dealing with unexpected expenses may mean adjusting your lifestyle, whether spending less time on hobbies, taking fewer holidays, or outright cancelling plans. It perhaps comes as no surprise that these changes can have a significant emotional impact.
Emotional impact
The emotional impact of an unexpected cost can vary massively from person to person because of the multiple factors at play. From the size of the expense, to the amount the individual has in savings, and even the number of bills that need to be paid. Every individual and circumstance is unique, but the most consistent result is that unexpected costs impact our mental and emotional health.
Of the 2,000 people we surveyed:
- 43% said unexpected expenses resulted in significant stress or anxiety.
- Over 30% of people said that the stress left them feeling panicked or overwhelmed.
- For 26%, the stress is so severe that it can result in disrupted sleep.
How people fund the unexpected
No matter how unexpected a bill is, it still needs to be paid. As we’ve already seen, this can be challenging, and for some, it may require some creativity to make ends meet. But first, let’s take a look at the source of most unexpected costs.
While these bills are unexpected, their causes are relatively familiar. The common sources for unexpected costs are:
- Home repairs (22%)
- Car repairs (21%)
- Family emergencies (12%)
- Medical bills (7%)
- Pet bills (7%)
Once someone is hit with a bill like this, what do they do? The majority of people (33%) use money from their general savings, while a quarter use specifically created emergency funds. Some 12% spread the costs with a credit card, while 8% turn to family and friends to help with payments.
Some Brits resort to more unusual methods to pay off surprise costs. These can include crowdfunding, using birthday money, or paying off expenses via their phone bill. Some 10% of 18–24-year-olds have resorted to selling their belongings to cover the cost of unexpected expenses.
Who’s most vulnerable, and who’s most prepared?
While no one can predict when they’re about to be hit with an unexpected bill, some people are more prepared for the eventuality than others. If we look at who’s the most prepared, 30% of 25–34-year-olds have emergency fund savings. However, they also record the highest levels of emotional stress from unexpected bills, with 42% reporting experiencing panic when faced with a new cost. Meanwhile, Brits aged 45–54 face the most expensive bills with an average cost of £1,982. So it’s no wonder that 30% are still recovering from the financial impact of their latest bill.
Emergency funds are pots of money that are saved for the event of an emergency or unexpected cost. However, it’s not always possible to start and maintain one, especially given the current economic climate. In fact, nearly a third (31%) of individuals in the UK say that the biggest barrier between them and a pot for an emergency fund is the cost of living crisis.
Long-term consequences
Anxiety aside, there’s often a long-term impact to unexpected expenses, especially if paying it off impacts your wider finances. As we’ve seen, most people cover the costs of surprise bills by dipping into their general savings. If you’re saving for something, maybe a holiday, a new car, or even a house, having to use the money you’ve set aside can push back any plans you may have. It’s not just a hypothetical either:
- Over 40% of Brits have said an unexpected expense has derailed a financial goal of theirs.
- Over half (57%) of 25–34-year-olds and 63% of 18–24-year-olds have had their financial goals impacted.
But across the board, unplanned expenses can take a long time to recover from.
- For most, it takes over six months to recover from an unexpected cost.
- At any given time, one in five Brits has yet to recover from their latest unexpected expense.
Planning for life’s ‘oh no’ moments
Unfortunately, there’s no way to avoid surprise costs completely; however, there are ways to minimise the fallout from unexpected bills. Paul Stringer, Director at Norton Finance, shares his expert insight:
“Unexpected expenses are never nice, but they shouldn’t keep you up at night. The best way to combat surprise costs is with an emergency fund, and if you don’t have one already, the ideal time to start is today. When it comes to saving money for an emergency car or home repair, think of it as little and often.
“As we’ve seen, day-to-day expenses can take up most of our budgets, so it’s important you don’t overstretch yourself. However, regularly putting aside what you can, no matter how small, into an emergency fund is better than nothing. After all, it won’t take long for your pot to grow.
“Some banks will allow you to create separate pots of so that you can break your emergency fund into a handful of categories, such as Home, Car or Medical. It’s up to you whether you want to put a cap on these funds or if you want to put money into them indefinitely. Either way, don’t feel bad when you have to dip into your funds; after all, that’s what they’re there for.”
You can learn more about managing your finances and budgeting with Norton Finance.
FAQ
What is an unexpected expense?
Simply put, it’s an expense or a cost that you weren’t expecting. Typically, these come in the form of emergencies. It could be problems with your car or home. It could also be unexpected travel costs as a result of a family emergency or the costs of an urgent medical bill.
What should I do if I can’t cover an unexpected expense?
If you can’t cover the cost of an unexpected expense immediately, you should begin exploring your options. For example, can you temporarily adjust your budget to help cover the new costs? Alternatively, can you borrow the money from friends or family members? Depending on the size and nature of the expense, you may need to speak with your bank or explore financial products such as loans or credit cards.
How much should an emergency fund be?
For emergency funds, a good rule of thumb is saving three to six months’ essential outgoings in an instant access savings account. This way, if an emergency arises, or if you lose your job, you’re covered until you can get back on your feet. For example, if you spend £1,000 a month on things like mortgage/rent, food, heating, and energy bills, you might aim for £3,000 to £6,000 in emergency savings.
Conclusion
We can’t plan for the unplanned, but we can prepare for it. Building an emergency fund offers peace of mind, helps reduce emotional stress, and keeps long-term goals on track when life takes a sudden turn.
If you're facing financial difficulties contact Money Helper, StepChange Debt Charity or Citizens Advice, for free confidential advice.
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