An emergency fund is money set aside for the things you can't plan for: a broken boiler, a car repair, or a drop in income. Without one, a surprise bill often ends up on a credit card.
Work out your essential spending
Add up what you have to pay each month: rent or mortgage, council tax, energy, water, food, phone, insurance, travel and minimum debt payments. Leave out treats and subscriptions you could pause.
Pick your target
A common rule of thumb is three to six months of that essential spending. Lean towards six months if you're self-employed, have one income in the household, or have dependants. Three months may be enough if your income is steady and shared.
If that number feels huge, don't let it stop you. A first goal of £500 to £1,000 covers most everyday emergencies. Build from there.
Where to keep it
Your emergency fund needs to be safe and quick to reach, so an easy-access savings account is the usual choice. Keep it separate from your current account so it doesn't quietly get spent.
Check the bank is covered by the Financial Services Compensation Scheme (FSCS). It protects up to £120,000 per person, per banking licence.
Make it automatic
Set up a standing order for the day after payday. Even £5 a day is about £150 a month, or £1,800 a year.