Emergency savings – how much is enough?

While it’s a good idea to set up your emergency fund  as soon as possible, it’s best to keep to what you can afford and try to save regularly.

Saving smaller, regular amounts is often more effective than saving larger amounts now and again. This is because you get into the savings habit, and you’re not overcommitting too much money. It also lets you budget your spending from week to week or month to month more effectively.

If this isn’t possible, save what you can as regularly as you can. Every bit makes a big difference.

Just like you would save for a wedding or a new car, work out how much you need to put aside, and set up a savings standing order or Direct Debit for the right amount.

Visualising your end goal – whether you’re preparing yourself against a car breakdown or replacing an expensive item like the cooker or washing machine – it will help you keep focused and on track as well. Keeping track with a chart up on the wall might help.

If you have debts, you might also decide whether it’s better to pay them off first or save and pay them back at the same time.

If money is tight and you’re not sure you can save, see our guides: 

• How to save money on household bills
• Living on a squeezed income
• review your income and spending with our Budget planner 
• if you’re claiming certain benefits, you can also use the Help to Save scheme which gives you a bonus of 50% (half) on savings paid into a Help to Save account.

Once you’ve met your target amount for the emergency fund, you might want to continue with the regular savings amount to fund other savings goals.

You want to be able to pay for an unexpected repair, but it's also important to have enough savings for tough situations.

For example, if you lost your job or broke up with your partner and needed time to recover, you’d want more than just the cost of a new boiler or washing machine.

Insurance is another way to cover unexpected expenses. 

It’s great that you’re starting to build up your emergency fund, but before you pile all your spare money into it, make sure you’re ready.

If you have:

• credit card debt
• unauthorised overdraft
• Pay-day loans
• Door-to-door lending or home credit
• arrears on your mortgage repayments.

It would be cheaper in the long run to pay these off first.

But if you’re keeping up with mortgage repayments and any other credit you have is low cost, temporary or well under control, it’s a good idea to add to your emergency fund.