5% unemployment figures – what you can do

Data on the number of people out of a job was released yesterday – and it makes for a worrying read. Official figures show that the UK unemployment rate rose to 5% in the three months to September. That’s higher than was expected, and is the highest rate since the period covering December 2020 to February 2021, according to the Office for National Statistics (ONS).

The unemployment rate rising could be a response to the government raising the amount of National Insurance employers are now required to pay for each employee. Or it could be because everyone is so nervous about what is to come in budget at the end of this month, and employers are holding off making recruitment decisions until then.

Whatever the cause, in a jobs market like this, having a financial buffer is very important: enough to cover 3-6 months’ expenses is best, but anything (however small) is better than nothing.

For your emergency fund, choose a savings account that offers easy access so you can get to your money without a delay, and look for the best interest rate. Shop around – we’ve listed our top recommendations for ordinary cash savings accounts here. Our top recommendations for Cash ISAs are here.

What’s the difference?

Cash ISAs:

• No tax to pay on the interest you earn
• Can only pay in £20,000 per tax year
• You need to think about whether it’s a ‘Flexible ISA’ or not: If your ISA is flexible, you can withdraw and replace money within the same tax year without it affecting your annual ISA allowance — but if it’s not flexible, any money you withdraw and then pay back in will count again towards that allowance
• Interest rates vary – so shop around

Ordinary cash savings accounts:

• You may have to pay tax on the interest you earn on your savings if it goes over your Personal Savings Allowance.
• There is no limit to the amount you can save (other than any limits your bank may apply)
• Interest rates vary massively – so shop around

And remember – with both Cash ISAs and ordinary cash savings accounts, check the terms and conditions on how easy it is to get your money out without delay and without paying a penalty. Easy access is key for an emergency fund.