Having an emergency fund could give you a way to manage unexpected cost without having to find all the money from your usual income or going into debt.

You can build one gradually. A useful savings amount will be different for everyone.

What’s an emergency fund for?

An emergency fund is there for costs or changes in circumstances that are:

Unexpected. You couldn’t reasonably plan for when they would happen.
Hard to put off. You need to deal with them quickly.  

This could include an essential appliance breaking, an urgent car repair, or an unexpected drop in your income.

Emergency fund money is different from money for things you know are coming. An annual bill, a planned holiday or kids’ school uniform are costs you can plan towards separately.

Could an emergency fund help you?

Think about what would happen if you had an essential expense you had not budgeted for. Would you:

• be able to pay it from your normal income and still cover your essential costs?
• have other savings you could use?
• need to put off other spending?
• need to consider borrowing to pay for it?

There is no right or wrong answer. Thinking through what you would do can help you understand whether having some money set aside for emergencies could give you more options.

You can also think about what would happen if your income stopped or was reduced unexpectedly. Which costs would you still need to meet each month, and how long could you manage them using money you already have available?

Work out what a useful buffer could look like for you

The amount in an emergency fund will be different for everyone. It’s a personal decision, based on what works for you.

Instead of starting with a large target, it can help to think about your emergency fund in stages...