Emergency Fund Calculator

What Counts as an Emergency Fund?

An emergency fund is a cash buffer for genuine surprises—job loss, urgent repairs, medical bills—not for planned purchases. Start with your essential monthly costs (housing, utilities, food, transport, insurance, and minimum debt payments) and multiply by a months-of-cover target. Many people aim for 3–6 months; if your income is variable or you have dependants, 6–12 months can feel calmer. Keep this money safe and accessible, usually in a savings account. If your account pays interest (APY), growth will help a little over time.

Right-size the target for your situation and review it a couple of times a year. If the target feels big, build it in stages (e.g., first £1,000, then one month, then three months, and so on). Once you reach your goal, consider redirecting monthly contributions toward investing or other priorities—while keeping your emergency cushion topped up as costs change.

Educational only—not financial advice. Everyone’s circumstances differ.

Understanding Emergency Funds: A Complete Guide

What Is an Emergency Fund?

An emergency fund is a dedicated cash reserve designed to cover unexpected expenses or income disruptions without forcing you to rely on credit cards, loans, or liquidating long-term investments. This financial cushion exists solely for genuine emergencies—job loss, urgent home or car repairs, medical bills, veterinary emergencies, or other unforeseen costs that can't wait. It's not for holidays, planned purchases, or routine expenses you could anticipate.

How Much Should You Save?

The traditional guideline suggests three to six months of essential expenses as a baseline. Essential expenses include only what you must pay to maintain basic living: rent or mortgage payments, utilities, groceries, transport costs, insurance premiums, minimum debt payments, and critical household bills. Discretionary spending—dining out, entertainment, subscriptions—can typically be paused during a genuine crisis, so these shouldn't inflate your target.

Your ideal emergency fund size depends on several personal factors. If you're self-employed, work on commission, or have variable income, consider extending your target to six to twelve months of expenses, as your cash flow may be less predictable. Similarly, single-income households, those with dependants, homeowners (who face maintenance costs), or anyone with high insurance deductibles should lean toward the higher end of the range. Conversely, if you have dual stable incomes, excellent job security, or strong family support, you might feel comfortable with three to four months of cover.

Where Should You Keep It?

Emergency funds require two key qualities: accessibility and safety. High-yield savings accounts, money market accounts, or easy-access cash ISAs (in the UK) are ideal choices. These vehicles offer quick access—typically within one to three business days—while preserving your capital and often earning modest interest (APY). Avoid tying emergency money up in fixed-term bonds, stocks, or other investments that could lose value precisely when you need them or impose withdrawal penalties.

Building Your Fund Gradually

If your target seems daunting, break it into milestones. Start with an initial £500 to £1,000 to handle minor surprises, then work toward one month of expenses, then three months, and so on. Automate monthly transfers into your emergency account to build the habit. Even £50 or £100 per month compounds meaningfully over time, especially if your savings account pays interest. As your fund grows, celebrate each milestone—these incremental wins keep motivation high.

Maintaining and Using Your Fund

Review your emergency fund twice a year or whenever your circumstances change—moving house, changing jobs, welcoming a child, or taking on new financial commitments. If you tap into the fund for a genuine emergency, prioritise replenishing it before resuming other financial goals. Once you reach your target, you can redirect monthly contributions toward debt repayment, retirement savings, or other investments, while keeping your emergency cushion intact and adjusting it as living costs rise.

This information is educational only and not financial advice. Everyone's circumstances differ—consider consulting a financial adviser for personalised guidance.