Life is unpredictable and full of surprises – not all of them good. Whether it’s a broken boiler, an unexpected dental bill or a sudden job loss, unexpected expenses can throw your finances into a spin and disrupt your budgeting. That’s where an emergency fund comes in – it’s your financial safety net, giving you peace of mind and breathing space when life doesn’t go to plan.
Here's a guide to building up your emergency fund – even if you’re starting from scratch.
An emergency fund is a pot of money which is set aside for the sole purpose of managing unexpected expenses – that is emergencies that you must deal with. Your emergency fund isn’t there to pay for holidays, nights out or planned purchases – it’s purely to help you manage the unexpected expenses that you have to pay. Having this pot of money means you won’t need to rely on credit cards to see you through difficult times.
A good rule of thumb is to aim to have three to six months’ worth of essential expenses – that is your rent or mortgage, utilities, food and transport costs. This can seem overwhelming but don’t worry; start small. Even £500-£1000 can make a huge difference in an emergency. The key is to start and build it up gradually.
Start with a target that feels achievable. For example, aim to save £100, then £500 and then £1000. Break it down into weekly or monthly goals so that it feels more achievable.
Keep your emergency fund separate from your everyday spending. This avoids any temptation to dip into it for spare of the moment purchasing and makes it easier to track your progress.
Set up a standing order or automatic transfer to your emergency fund each pay day. Even £10 a week quickly adds up and you won’t miss it as much if it’s done automatically.
Review your budget and look for where you can save money, within your budget. Cancel any unused subscriptions, cook at home more often and look for cheaper providers. You can redirect any money that you save to your emergency fund.
It can be tempting to blow any extra cash on treating yourself. However, unexpected cash injections like a tax refund or even some birthday money, is a great way of boosting your emergency fund without impacting your regular budgeting,
Once you hit your initial goal, set another one! Life is good at throwing curve balls so make sure your emergency fund can cope. Review it regularly and make sure you adjust your targets if your essential spending increases. Remember: only use it for true emergencies and if you do dip into it, make sure you top it back up as soon as you can.
Building an emergency fund isn’t just about money – it’s about peace of mind. It gives you confidence, reduces stress and helps you stay in control when life gets messy. Start small, stay consistent and celebrate every milestone.
Now that you know that an emergency account is important, see how Budget Pro lets you track multiple accounts.