How Much Emergency Fund UK (& Where to Keep)

Having an emergency fund has come in useful many times over the years and saved a lot of extra stress on top of already stressful times of large unexpected expenses.

An emergency fund is an invaluable tool for your personal finances.  In times of financial stresses, it can actually help you think straight and help you potentially very costly decisions such as taking out payday loans or going into overdraft, simply because you can’t think straight.

Here we look at how to build your emergency fund and how much you really need.

What will your Emergency fund cover?


How Much Emergency Fund Do You Need in the UK?

3 to 6 months of essential outgoings is a good emergency fund to aim for.   If you are in any form of consumer debt start with an initial emergency fund of £500 to £1000 before continuing to pay off your debts.  Continue building towards a full emergency fund when those debts are paid off.

This intial starter emergency fund reduces the need and the habit of you going into debt when you can’t pay any expenses or unexpected bills.

Build Emergency Fund or Pay Off Debt?

A rainy day fund is a good lifelong personal finance habit you can put into place immediately whether you are currently in debt or not.  The idea of building an emergency fund even while you are in debt is to break the habit of relying on debt when things go wrong, which they inevitably will from time to time.

Once you have built an initial emergency fund of £500 to £1000, focus on repaying your debt.  Only once all your debt has been paid off do you focus on building a full emergency fund equivalent to 3 to 6 months outgoings.  This is a good solid buffer against hopefully never needing to go into debt again.


  • Build Emergency fund of £500-£1000
  • Pay off debts personal loans, credit card debt, overdrafts
  • Start building a full emergency fund of 3-6 months essential outgoings

How to Save an Emergency Fund When Money is Tight

If you are in consumer debt with no savings, it’s a good idea to focus hard on building your emergency fund as soon as possible.

We have put together tips for living on a tight budget which will help you save a few pounds a week or month, no matter how tight your budget.  If you really are doing everything to save money, then focus on the next step, making more.

Apart from saving on expenses the other main thing you can do is actively make more money.  We have put together a number of ways to make money from home or start one of  67+ side hustles ideas.  There’s something for everyone.  Every extra pound you make can go straight into the emergency

Another option is to sell stuff you own but no longer use, for example, there is a range of great apps where you can sell old clothes or sell DVDs online for cash.   Or sell things at local car boot sales.

To continue building your emergency fund over the long term you could set up monthly standing orders from your other accounts.  Ideally, do this around the time you get paid so are less likely to notice it as outgoing.  This is essentially a form of paying yourself first.

Do You Need a 3 or 6 Months Full Emergency Fund

How many months you choose to build for your emergency fund will depend on various factors:

  • Your own personal comfort level
  • How solid your job is, is it cyclical or fluctuating (musician actor)

Is your income steady or cyclical, for example, actors and musicians or someone starting their own business might want 6 months or maybe more if they know they have a higher probability of being out of work for a time.

If you are just starting to build your emergency fund this might seem a lot.  Simply set it as a goal and save towards increasing your emergency fund every month or when you can.

If money is tight, remember a little often soon adds up, so just put by what you can afford, but do try to set up on auto so you can forget about it.

At times you will need to spend from your emergency fund.  Don’t let this feel like a setback.  If you are spending the money on an unexpected expense the emergency fund is doing its job.

Examples Monthly Outgoings to Cover

To work out your emergency fund value you will need to know your essential monthly outgoings.

These might include:

  • Mortgage or rent
  • Household bills (gas/electric/water/insurance)
  • Transport Costs
  • Food
  • Pets costs
  • Debt repayments (ideally this would be paid off)

You don’t need to include expenses you could cut if you needed to.  You just need to cover the expenses that you would still incur even at times that you might have to cut back and live on a tighter budget.

Your emergency fund wouldn’t need to cover non-essential costs like the following if you can cut them:

  • Netflix
  • Music Streaming subscriptions like Spotify
  • New clothes
  • Monthly savings towards a holiday
  • Meals out
  • Takeaways

As you can see, if a big emergency did arise you also have the option of cutting down in times of need, therefore your emergency fund may not need to be equal to your current monthly outgoings because you could simply reduce them.

Obviously, if you wouldn’t want to go without any of the above in times of need factor them into your emergency fund savings.

Your typically monthly outgoing might be £1800 a month, but in times of emergency, perhaps you could make cuts to reduce down to £1200 a month.

Therefore instead of needing an emergency fund of £5,400 to £10,800, you would only need an emergency fund of £3600 – £7200.

If your monthly expenses change over time you will have to change the emergency fund amount accordingly.

Why Do You Need an Emergency Fund

One of the most important things an emergency fund can give you is headspace and a feeling of security.  An emergency fund can free you from worry about where money is going to come from to pay the next bill or unexpected expense.

An emergency fund stops you from ever having to go into consumer debt.  For many people with no money, debt is only a quick fix solution with long term consequences.  They now have to add in repayments and interest rates to their already tight lifestyle and therefore more likely to need more debt in the future.

An emergency fund could be used to pay unexpected expenses such as:

  • Job Loss
  • Car repairs or new car
  • Boiler repairs
  • House maintenance

Individually many of these expenses will be a lot less than your total fund, however, it’s sod’s law one emergency often quickly follows another.

To highlight, an emergency fund also provides you:

  • Sense of security
  • Headspace in times of financial stress
  • A solid foundation to personal finances from which to grow

Where to Keep Emergency Fund UK?

Ideally should keep your emergency fund set to one side in a bank current.  This could be a current account or an easy-access savings account.  In a bank account, you know your money is safe and not at risk of being dipped into or even stolen like cash saved in a house.

If possible, choose an account that pays you interest on your savings, in an ideal world at a rate above the rate of inflation so your money doesn’t lose spending power over time. Sometimes current accounts pay higher interest rates than savings accounts or have added perks that might be worth considering.

The main point is that wherever you keep your emergency fund, it should be immediately accessible in times of need.

Ideally, keep your emergency fund separate from your main spending accounts in case you unwittingly go into it or subconsciously start feeling you have more money to spend.  Keep it out of sight out of mind until times when you need it.

Related post > You could also use a second bank account for switching to make money, typically £100+ a time.

What is the Difference Between Emergency Fund and Savings

An emergency fund is money put by for the sole purpose of covering unexpected expenses and keeping you out of debt.

General savings is money put aside for a purpose such as a holiday, new car, or deposit towards a house, future investments or just for cash comfort or rainy day fun.


As much as anything an emergency fund offers peace of mind and much-needed headspace to think straight and make good financial decisions during times of unexpected financial stresses.

If you haven’t already, start an emergency fund today, its easy to do and a great foundation to your personal finances.

1 thought on “How Much Emergency Fund UK (& Where to Keep)”

  1. Having 6 months worth of expenses in my emergency fund helps me sleep at night. Saving an emergency fund is a brilliant first step to securing your financial future.

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.