What is an emergency fund?
An emergency fund helps prepare you for unexpected expenses. How would you cope with a large, unexpected bill? What if you have a leaking pipe or the exhaust has fallen off the car? These unexpected events could be stressful and costly but having an emergency fund could help alleviate this.
How much should I have in my emergency fund?
It’s recommended you have at least 3 month’s worth of living expenses in an emergency fund, ideally up to 6 months’. Here's a simple way to calculate this:
- First, examine your budget. Read our quick guide to better budgeting here.
- Then list out all of the expenses that need to be covered every month (rent, bills etc.)
- Finally, add them up and then multiply that figure by three or six (3 or 6 months)
"Customers who start building an emergency fund tell us that the best way to do that is by setting a goal, which is personal to them, and committing to that goal by putting away a small amount each month. Doing this when you are paid, and taking the approach of saving little and often, means it all adds up quickly - resulting is less worry and more confidence for whatever the future holds."
Lewis Broadie | NatWest Savings Expert
Leads the NatWest Retail Savings team
How to build up your fund
1. Reduce your monthly outgoings
2. Open a savings account
3. Set a savings goal
4. Pay yourself first
Hopefully now that you have a better idea of what an emergency fund is and what it should be used for, you could start building your own emergency pot so that you'll be prepared for if something unexpected happens.
Remember, everyone’s emergency saving fund will look different but the sooner you start saving and putting some money away, the better prepared you’ll be.