Financial planning experts typically recommend that you should keep the equivalent of three months’ salary in an instant access deposit account to safeguard against unemployment. If, on the other hand, you are self-employed, they tend to recommend keeping the equivalent of six months’ earnings in case you hit a sticky patch.
It is also possible to take out unemployment cover, either on a stand-alone basis or as part of a product known as payment protection insurance – which also covers accident and sickness.
Unemployment insurance will pay out a regular income for up to 12 months if you experience involuntary unemployment. But it will not cover voluntary redundancy, which can be a big issue for those who work in industries where this has become a common way of exiting employment.
Unemployment insurance will also not cover you if you resign or lose your job as a result of your own misconduct, and it is of extremely limited appeal to the self-employed because it only covers them if they permanently cease trading.
If you are a homeowner, there is also a lot to be said for opting for a mortgage that is flexible enough to allow you to take ‘payment holidays’ – so that you can suspend your mortgage payments for several months during a period of unemployment.Last Updated