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Emergency funds: how much is enough?

Three months? Six? It depends on how stable your income is and how quickly your costs could fall. A simple way to find your number.

Priya Nair2 min read

A pile of coins on a white table
Daderot · Public domain

An emergency fund is money set aside for the expenses you cannot plan for: a broken boiler, a vet bill, a gap between jobs. The usual advice is "three to six months of expenses". That range is so wide it is almost useless. Here is how to narrow it down.

Start with essential costs, not income

Add up what you would have to pay each month if things went wrong: housing, utilities, food, insurance, minimum debt payments, transport. Leave out holidays and subscriptions you could cancel. For most people this is 50 to 70% of their usual spending.

Then adjust for risk

  • Stable salary, two incomes, in-demand skills: three months of essential costs.
  • One income or dependants: four to six months.
  • Self-employed or commission-based income: six to twelve months.

Common questions

Where should I keep it?

In an easy-access savings account separate from your everyday account, ideally one that pays a competitive interest rate. Not invested in shares — the point is that it is there when markets are down.

Should I pay off debt first?

Build a small starter buffer (one month of essentials) first, then pay down high-interest debt, then finish the full fund.

What counts as an emergency?

Something unexpected, necessary and urgent. A sale is none of those.

Build it on autopilot

Set up a standing order for the day after payday. Even 5% of income reaches three months of essentials in about four years — and most people get there faster by adding windfalls like tax refunds or bonuses.

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