How to set up an emergency fund

Losing your job or having a sudden cost like your boiler breaking or car falling apart can tip you into debt. Here’s how to avoid that scenario by setting up an emergency fund.

girl sitting at table looking at phone

What is an emergency fund?

Your car has broken down, your teeth are screaming in pain, or your phone has fallen down a drain. Everything seems gloomy, dark and, in your phone’s case, damp.

Or, worst case scenario – your life has flipped upside down. We’re talking: a job loss, relationship breakdown, or home eviction.

This is where having some money put aside will make an awful day a tiny bit better.

How much should be in my ‘rainy day’ fund?

Experts suggest 3-6 months’ wages, but that’s for older people with mortgages, children and the like. For a young person, we’d suggest around six weeks’ outgoings (saving a month’s rent is handy anyway in case you have to move house and need the deposit).

To work out your personal six-week sum, sit down with a piece of paper and list everything you spend a month. Stick to the necessities:

  • Food
  • Bills – heating, electricity, internet, council tax, phone
  • Rent
  • Transport, say to and from college

Tot up the total and make that your saving goal for your rainy day fund.

Where exactly am I meant to get this spare money from?

Good point, well made. After paying your rent, bills, and debt, and ensuring you’ve got a solid emergency savings fund it can be tricky to find any money left at the end of the month.

But remember that this fund doesn’t have to be huge. Hopefully you’ll barely have to use it. Saving just £3 a day (that’s a supermarket meal deal) can total £1,095 a year.

What counts as a rainy day? 

Making sure you know the reasons why you’ll dip in to these savings will help you be strict with yourself about when you can use the money. Paying for an early upgrade on your phone because you’re feeling particularly fed up one day of it being super slow doesn’t count.

What type of account should I use? 

You should use what’s called an ‘easy access’ savings account. These tend to have low interest rates in return for making your money available in seconds, when you need it. Just be sure that you’re eligible and that you can easily transfer money between accounts with no restrictions. Finding one that’s accessible online is great too.

More ways to save some pennies

We hear you – saving six weeks’ outgoings is a massive ask when you’re earning very little and have bills to pay. Here are some more tips for squeezing some savings out of your lifestyle:

  • Having a birthday? Some money could come your way if you’re lucky. If you don’t know what to do with it, put it straight in a savings account where it could be earning interest rather than dust.
  • Do some regular clearing out of clothes, books, CDs, DVDs, and anything else sellable. eBay and Depop are the go-to websites for this.
  • Review your outgoings and see if you can cut back on anything. Do you really need Amazon Prime?
  • Take your own lunch to work/uni/college/school instead of buying a footlong Subway or cheeky Nando’s.
  • Buy a refillable water bottle.
  • Use the train? Invest in a 16-25 railcard. It may cost you some tenners initially but you’ll soon make the money back on cheaper fares, including when using an Oyster card. Plan journeys in advance to find cheap (ideally off-peak) prices.
  • If you’re planning a day out then rinse voucher websites like and Groupon. You can get deals on theme parks, zoos, countless other attractions and a bunch of restaurants.
  • Sign up to your favourite restaurants to get birthday offers. Free bottle of Prosecco, anyone?
  • Plan your food shops in advance as much as you can. Plan your next week’s worth of meals and go out to buy ONLY what you need for those meals. This’ll likely save waste as well as money.
  • Buying fruit and veg from your local greengrocer can also be a lot cheaper and better for your community!
  • Oh, and don’t go food shopping when you’re hungry.

I’m facing a job loss or a major expense and I don’t have an emergency fund

If you’re in a crisis situation, don’t panic – and if you’re in debt, don’t ignore it. Get help with our crisis article and our support on getting out of debt.

More information