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What’s a ‘Freedom Fund’ and why do we all need one?

Freedom Funds have been a hot topic of conversation in recent years, though you may have heard of this savvy savings account under a different nickname. Mad money, running away money and independence funds are just a few terms people use to describe this empowering stash of cash.

A freedom fund isn't your typical emergency savings account. It’s not something you’d dip into in the event of a broken boiler or a failed MOT.

Instead, think of it like an emergency fund’s motorbike-riding older brother or a cool aunt with a villa in Spain. A freedom fund is protective and empowering. It’s your ticket out of a bad situation.

When might I need a freedom fund?

Well, if your boss is a bully, your partner makes you unhappy or your housemate has been having parties throughout the pandemic, it’s only natural that you might want to leave.

And yet, it’s a sad reality that our financial circumstances can keep us trapped in bad situations. Many of us will have already encountered times when a freedom fund would have been a valuable asset to have.

When you have enough money in your account to move out and start afresh, leaving a toxic relationship can be less scary. It can be empowering too. With the help of your savings, you could treat yourself to furniture you know your partner wouldn’t have liked.

The best time to save a freedom fund is when you don't need one. The second-best time to save one is when you do - and that can be challenging.

My life’s going great, so I don’t need one. Right?

Even if life’s good and everything is going well for you, it’s still wise to save money just in case you need a plan B. Your relationship with your partner might not last forever, your boss might leave the company and get replaced by someone who isn’t so great, and even 10-year friendships can turn sour.

The best time to save a freedom fund is when you don't need one. The second-best time to save one is when you do - and that can be challenging.

How much money should I save?

There’s no perfect freedom fund figure and what might work for one person might not be enough for another.

Some people consider how much they’d need to escape from certain situations while others work towards a figure that just sounds impressive such as £5,000 or £10,000.

It can be helpful to think about why you’re saving your freedom fund in the first place. Spend a bit of time daydreaming about what you’d like to do with the money. Do you want your savings to just help you escape or do you want to be able to treat yourself to some luxuries too?

Remember, your freedom fund is still valuable even when you’re working towards your goal. If you’re aiming to save £3,000 in total, just having £50 in there is great progress and better than nothing.

How do I save the money?

Now for the hard part - saving the money.

With the pandemic forcing many of us to stay indoors and avoid meeting our friends, for those who currently have an income, there’s never been a better time to save money that used to be spent socialising.

Set up a standing order to take a lump sum from your account on payday and transfer it into your freedom fund automatically – you won’t miss money that you never felt you had.

If you’re struggling to find places to trim expenses from your budget, ask a friend to non-judgmentally help you realise where you’re overspending.

Saving a freedom fund is no easy feat. Not only do you need to find creative ways to save and make extra money, it’s also a test of endurance and determination.

When times get hard, it’s important to remember your end goal and think positively about your ability to reach it.

Don’t forget that while you may think that this article is brilliant, it is intended for information purposes only and should not be mistaken for financial advice or recommendations.

3 things to do
right now

1

Set up a standing order to take a lump sum from your account on payday and transfer it into your freedom fund automatically – you won’t miss money that you never felt you had.

2

Just like you wouldn’t go on a road trip without planning your journey, you need be focused when it comes to savings – so set a goal for the amount you need and the date that you want to achieve it.

3

Keep your savings in a different bank than your current account as out of sight, out of mind. Plus, the harder that you make accessing the funds, the less likely that you are to touch it.

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3 Things
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