Creating An Emergency Fund


Having an emergency fund is a crucial part of becoming debt free and achieving financial independence. One of the first pieces of advice you will receive when you talk about money and budgeting is to have a back up plan/contingency fund/emergency fund in place

Why is it crucial?

These are the most popular reasons that I end up using my contingency fund

  • Unexpected costs – Not emergencies, but things that come up that I didn’t expect, this could be small things like the car MOT coming in more than you expected (I have had bad experiences with this one) Being in a position where we might have had no car as I’m the only one that drives nearly drove us to tears(pardon the pun); who wants to be in that situation
  • Stop getting deeper into debt – Whats the first thing that you may cut back on if you suddenly had to pay out for an emergency? Maybe reducing your credit card payment to the minimum payment? or the plans to chip away at that overdraft? If you didn’t have an emergency fund the only way that you would be able to pay for it would be to put it onto a credit card or loan therefore getting yourself further into debt
  • Bank charges – Living on the breadline and always waiting for the next payday isn’t a great situation to be in. When this is the case you may get into a situation where you can’t meet all of your commitments and have to prioritize keeping the roof over your’s and the family’s heads, when this happens you may have to pay late fees or missed payment charges on bills that you couldn’t pay. Having the emergency fund in place means that you have that cushion to fall back on to prevent this from happening
  • Getting ahead – When you are in a position to contribute to your fund, this will mean that you can get yourself 1,2 or 3 months ahead of your bills. Once you get into this position you will feel that burden and stress lift knowing that if anything minor happens you wont have to worry as much as you may have previously

How much should you save

There is no right or wrong answer here, ask 100 different people and you will get 100 different answers! What I generally hear is to have at least 3-6 months worth of monthly outgoings put away so you know that if worst comes to the worst, then you have this amount of time to get back on your feet. Through experience, I understand that not everybody can do this, if you can put away £50-£100 a month this is a start and you would be surprised on how quickly your savings build up. My own emergency fund is crazy, sometimes I will have a good amount in there and sometimes nothing, sometimes I can put money in and sometimes I can’t. It’s always the case that when you are getting yourself into a good position something always comes up and takes it away from you. But look at the positives, if the fund wasnt there and something unexpected happened that meant you had to spend money, what would you do? where would the money come from? credit cards, Loans, asking the family for help, I’d rather not do this thank you!! And this is where your little tucked away fund comes in

If you already have an emergency fund, fantastic!! if not then here is your chance to start. Below are my top tips to either help build up your fund further or to give you ideas on where you can find that extra cash to start your own emergency fund

Top 6 tips to help build up your fund

  1. Baby steps – Start small, have a look at your budget and see how much you can afford, whether this is £10 or £100 it doesn’t matter, you need to make sure that you are comfortable with the amount you are putting away. Anything is better than Nothing. Once you get used to the extra outgoing and it is seen as the “norm” then increase the amount you are putting away, this is going to be the saviour one day if something unexpected comes along (just don’t be tempted to dip into it to treat yourself!)
  2. Treat it as a bill – When you are sitting down to do your budgeting (if your like me this will be on payday or a few days before), factor in the emergency fund as an important outgoing and put it alongside your rent/mortgage, gas/electric etc. This will mean that come payday, it can be moved straight into savings and you will know what you have left over for all your other outgoings and not have to worry
  3. Save the pennies – Say you go to the supermarket and spend £45.40, round this up to £46 and add the 60p to your emergency fund. This is a quick way to build up your savings and as it’s a small amount you shouldnt miss it. I have heard that Lloyd’s bank do this and some other banks may do this automatically for you so worth checking and asking it to be set up if they do
  4. Bonuses/Tax Refund – Nobody expects to get a bonus but when you do it’s a nice surprise, I used to go out and spend it all and not see much from it. But it happened one day, the car broke down, I had nothing in the bank which made me think about splitting future bonuses, a % for me and a % for the savings for the “just in case” moments, I’ve never looked back and would never stop doing this
  5. Save the £1 or £2 coins – I’m not one to use cash very often as I like to get the cashback and points from cards, but if you’re a cash kinda person then every time you get a £1 or £2 in your change, pop into your savings (savings tins are great for this) The mother in Law (to be) did this with £2 coins and opened the tin up when it was full (took about a year I believe) and she had a hefty £800 tucked away, now that’s a nice amount to have for a just in case situation
  6. Reduce your expenses – If your like me, when you are setting out your budget you can look for ways to cut back on the outgoings, do we all need the sky TV?, do we need that magazine subscription? consider how may coffees you may have when your out and about. The money that you find you can save, put the same amount or even a percentage of it into your emergency fund, at the end of the day, you have been used to paying this out over the months so wont miss it that much

Good Luck


Disclosure: This post may contain links which could be affiliate links, meaning, at no additional cost to you, I will earn a commission if you choose to make a purchase. I recommend them out of personal experience and I am very grateful for your support of this site in this way. Thank you.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this:
search previous next tag category expand menu location phone mail time cart zoom edit close