Let’s talk about Emergency Funds and why they’re so important! 

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What is an emergency fund?

An Emergency Fund is not an extra pot to dip into when you need some money before payday or you’re booking a holiday or you’re doing a big online shopping haul! It is a pot of money that you should be able to access relatively easily, but only when you need it. It is something everyone should really consider having.  

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How much should it be?

The total is completely dependent on your income, your outgoings and your personal situation. You could start with a round number, say £1000, and then work up to an amount that you would be comfortable with. A general recommendation is around 3-6 months of expenses, but if you’re self-employed, you may want this to be higher, say around 6-9 months. In terms of the actual account, an easy access savings account with a high interest rate is a great place to start. 

Let’s look at some real life examples to give you an idea of how an emergency fund could help you. 

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Megan, 29 

Do you have an emergency fund? Yes, I put a bit of money towards it each month.  

What is the value? Currently £3000, but I would like it to be around 3-6 months expenses, so I’m building it up. 

Have you ever had to use it? Yes! A few months ago, my car service, tax and insurance were all due in the same month. I have sinking funds for all of these, but my service was three times more than I expected (due to a world of unexpected issues), so I used my emergency fund to cover the rest of the cost. I felt guilty at first, but realised this is exactly what it’s for so I’m glad I had it and I’m working on building it back up. 

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Saeed, 23 

Do you have an emergency fund? Yes.  

What is the value? It amounts to about 2 months salary, but I’m aiming for 5-6 months. I haven’t been able to reach that goal yet, but I’m working on it!

Have you ever had to use it? Last year, my laptop broke out of the blue and it’s crucial for my work (and personal life) so I used it to cover the cost of a new one. 

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Naomi, 31

Do you have an emergency fund? Not exactly - I let my current account build up so that there’s money in there that I can use for emergencies. 

What is the value? I like to have a minimum of one and a half to two months salary there, but at the moment it’s more like four. I’m in the process of buying my first home, so I’ve been in ultra saving mode! 

Have you ever had to use it? Not yet…although buying a house has come with a load of extra bills already so I’m glad I’ve got a lump of money ready to use if I need it.