How much should I have in an emergency fund?
Most people should aim for 3 to 6 months of essential outgoings in a separate, easy-access savings account. That covers housing, bills, food, childcare, and transport. It's the buffer that lets you handle a job loss, an unexpected repair, or a gap in income without reaching for credit cards or selling investments at a bad time.
What counts as essential spending?
Think mortgage or rent, groceries, bills, childcare, transport, and any must-pay commitments. It's what you'd still need to cover if your income stopped for a while.
You don't need to include extras like holidays, subscriptions, or eating out.
Why 3 to 6 months?
Because that's how long it typically takes to find a new job if you're made redundant, even in a strong job market. An emergency fund means you can ride that out without stress. It also protects you from needing to sell investments at a loss or rack up credit card debt when life throws a curveball.
Is 3 months enough?
There's no single right answer. Three months is a common starting point, and for many people in secure jobs with a second household income, that feels comfortable.
It's partly personal preference. Some people sleep better knowing they have a bigger buffer, even if the maths says three months is plenty. Others prefer to keep less in cash and put more to work elsewhere.
That said, certain situations tend to push toward a larger fund:
- Self-employed or freelance income
- Being the sole or main earner in your household
- Irregular or commission-based pay
- A large mortgage relative to income
- Dependants with no second safety net
For most people in those positions, six months is a more common target.
Where should I keep it?
A high-interest easy-access savings account is ideal. Most people keep this accessible rather than locked away or tied to investments. It needs to be there when you need it, no penalties, no waiting.
What if I don't have that much yet?
If you already have investments but no emergency fund, it may be worth considering whether to redirect some of that money into cash. Having investments without a safety net can mean being forced to sell at a bad time.
If you're building from scratch, starting with one month is a solid first step. Many people set up a standing order on payday and grow it gradually. It's fine to build over time, especially when juggling mortgages, childcare, and career costs. The key is to get started.
What comes next?
Once your emergency fund is in place, you can look at overpaying debt or investing for growth. But resilience comes first. It's your financial shock absorber, and it deserves to be fully funded.
