An Emergency Fund is a savings pot that can help you out in emergencies – it’s very important and should be one of the first things you save for.
You want to be able to pay for unexpected repairs, like your car breaking down, but it’s also important to have enough money to keep you on your feet in case of big life changes, like losing a job.
Saving just £3 per day or £20 a week adds up to £1,040 after 1 year. Saving small, regular amounts will help you get into the savings habit, and make steady progress that will add up quickly.
A good basic practice for a strong emergency fund is to have three months of essential expenses available in a quick access savings account. So, as in the example above – if you lose your job you’d have 3 relatively stress-free months to find a new one.
For example, if you spend £1,000 a month on mortgage or rent, food, heating bills and other things you can’t live without, you should aim for £3,000 in emergency savings.
Remember, any amount saved will help you if you have to pay for something you weren’t expecting.