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How To Build An Emergency Fund In The UK

The world continually preaches the idea of living in the moment, while overlooking the future. This extremely romanticized concept of eliminating the concern regarding your future is a luxury exclusive for the elite. In reality, the only way you can truly enjoy the comfort of living in the moment is if you feel confident and secure about your life in the foreseeable future.

Although, the desire to discard irrational concerns in regards to the uncertainty of the future is not a product of a wildly imaginative mind. In fact, the initiative is quite healthy and positive for your mental health. However, in order to experience the serene state at which you feel comfortable in your presence, you would have to simultaneously take action in order to protect yourself from an ominous-looking future. As a result, you must find a balance between enjoying the present and preparing for the future.

When it comes to financial security, you can save your future-self from distress by building an emergency fund. An emergency fund can function as a safety net if you ever find you ever self in a blatantly difficult financial situation.

What is an Emergency Fund?

An emergency fund is a financial lifeline in case you need it in future. The fund is the money you save and reserve for use when you encounter an unanticipated event in life. The unfortunate situations could be unexpected job loss, facing a medical emergency or combating any sort of financial turmoil. In life, there is always a degree of uncertainty present which is why it is crucial to take precautionary measures to guarantee protection from the financial challenges you could face in the future.

For instance, consider the current economic crisis due to the COVID-19 pandemic. The global outbreak of coronavirus led to a drastic increase in the unemployment rate. In addition to this, the workers who did not lose their jobs suffered from extreme pay cuts. Hence, more than half of the workers are facing a financial crisis during this dark time. Therefore, the coronavirus situation is a wakeup call to foresee the necessity of having an emergency fund saved for a rainy day.

Having an emergency fund can function as your financial support in situations when you run out of options. You need to have some liquid assets that can get you out of a financially sticky situation in a swiftly manner, without compromising too much on your current lifestyle. With an emergency fund, you would not have to rely on a credit card facility, overdraft or a high interest loan to guarantee survival. Instead, you can free yourself from the hassle and the stress of raising cash and getting into debt.

Get your partner on board with the plan

When you are ready to take the first step towards building a security net for yourself, make sure that you are not alone in doing all the heavy lifting.  Do not bear the financial burden of adding to the savings fund all on your own. If you have a partner or a spouse, be sure to make them a part of your journey.

With a shared set of goals, you are more likely to stay dedicated to your mission. This means, that you and your partner can input an equal amount to the fund, thus taking one step one forward to achieving your shared goals. You can communicate with your partner and jot down your financial goals for the future. This is so when you assign numbers to your abstract thoughts, you both would be able to see and emphasise on the importance of setting up an emergency fund.

Furthermore, if your partner is aware of the fact that you are currently trying to save, you are more likely to behave in a manner that facilitates savings. Psychologically, when you make a public commitment and promulgate your personal goal to an individual, you are more likely to follow it and stay on course. Hence, you and your partner can make sure that you both remain accountable and disciplined throughout the process of building the emergency fund. For example, if one of you derails from the path of saving and engages in a spur of the moment shopping spree, the other can remind about the mutually set goal. As a result, you both can push each other to stay determined.

Additionally, starting an emergency fund with your partner could make the journey relatively easier. You both could actively contribute to making changes in your current lifestyle to ensure that there is an amount left to be saved at the end of the pay cycle. For instance, you and your partner could start cooking meals at home, instead of takeaways on a daily basis. This will enable you to save money on food and have that amount to your future selves.

However, if your partner is an impulsive spender, you can make a mutual decision to limit their access to the emergency fund. As this amount is liquid cash, there is no guarantee that they may not “borrow” from it at some point.  Take all precautionary measures to ensure that your emergency fund remains safe and employable when needed the most.

Establish the right amount of saving

Once you and your partner agree to embark on this journey, the next stage becomes deciding the right amount for the savings. Normally, you are recommended to save enough of an amount that lasts for at least three to six-month period. You can achieve this objective by saving this amount over a period of a months or years, as you feel comfortable – the sooner the better.

The total amount of money you put in, as well as the time duration for the process, may vary based on your individual situation. For instance, if you have a big family, you may need to save relatively more than a couple with no dependants. As a result, you must consider the ponder over the following questions before starting your fund:

How much money are you able to set aside?

The amount that goes into the emergency fund is the excess money that you do not need to survive. To calculate this value, you can create a spreadsheet of all your monthly expenses- including rent, travel costs, gas money, bills, and even your food and grocery budget.  You can then subtract this number from the sum of your total incomes. The remaining amount can be contributed to the emergency fund.

What figure do you presume to be a stable amount?

You further need to have an understanding of how long you need to save for. As a result, it is essential to deduce a figure that tells you the exact amount you need to save for your rainy-day fund. As stated earlier, this amount can vary from family to family. However, the basic thing that you need to consider is whether the decided amount can last you a few months. This suggests, that the emergency fund amount should be at least three to six times your current monthly expenses. To factor out inflation or the increase in prices, you can slightly increase the figure for your own sense of comfort.

How much money does your income allow you to save?

Once you have determined a ‘number’ you need to save, and have created a ‘game plan’ to achieve your goals, you must consider whether your current income is enough to reach that objective in the desired time frame. If you feel that your job fails to provide you with enough money to allocate to your savings fund, you can either start side-hustles or get a part-time job to make sure that you stay on track.

Select a savings facility

The next stage is to find a savings facility that can store your emergency fund. As this amount is extracted in unexpected situations, it is extremely important to pick an option that lets you access your money at any time.  Considering this, avoid investing or loaning the fund with the purpose of charging interest. Remember, you must be able to get your money in cash when you need it.

As a result, you have limited options to where you can store your emergency fund. The most commonplace for saving is opening up a joint bank account with your partner. You can go through the policies of different banks and consider the various account types you can opt for. For example, you may wish to deposit your money in interest paying account which lets you instant access to your money when needed. It is vital to ensure that any interest paying account you deposit your money does not have any restrictions on withdrawal otherwise you will not be able to access your cash when needed. Conduct thorough research on your options before you deposit the cash.

If you are opting for a high-yield savings account, be sure that the account offers instant access, as well as an ATM/cash card. In addition to this, educate yourself on initiation fees and the monthly fee. Ideally, you would want to open an account where there are no extra or hidden charges.

Automate top-ups to keep your fund growing

If you have a busy schedule and require constant reminders to get things done, you can employ a standing order to automate top-up in to your emergency fund on a monthly basis.

With this method, you wouldn’t have to stress about making a transaction every month to add to your fund. You can schedule automated payments for your emergency fund account, by setting up a direct debt with your current account. You can set an amount every month which will be transferred at a specific date, depending on when you get paid your salary.

If you select the automated top-up payment method, you can guarantee that your savings account is receiving the required payments every month. Additionally, with the savings account subtracted, you would gauge an idea of how much money you can spend for the rest of the month. Having this number in front of you would push you to be careful in our spending. Therefore, you would consciously make the decision to avoid spontaneous and unnecessary spending.

This is the concept of ‘paying yourself first’ where you deduct an amount for saving first and live off what’s left after. This will help you stay on course and will ensure your emergency fund gets build up in the required amount of time.

When you set up an automated saving plan, you have the opportunity to review your budget and make changes to it, if it deems necessary. As your saving amount is extracted from your every-day account, right after you get paid, you can truly gauge the factors that affect your monthly spending. With this new knowledge, you can make changes to your short-term and long-term goals, to accommodate to your monthly expenses.

Determine what constitutes as a ‘rainy day’

Saving up enough to build your emergency fund is a difficult process. This is why, it is important to make sure that you do not waste the money on something mediocre, such as a vacation, renovation or a one-time purchase, until you are comfortable with the emergency fund built up.

When you set up the fund, you must set clear guidelines for yourself, as well as your spouse, to make sure that you only access the account in the case of a real emergency.

A real emergency scenario could be, in which you and your partner both lost their jobs at the same time. Without any income being generated, your emergency fund can help you survive the no-income period while you both get back on your feet. Although the likelihood of these situations is very minimal, you still need to take precautionary measures for this situation. The COVID-19 pandemic has made it very clear that you need to have a financial contingency planned for grim times.

Additionally, you can also tap into your emergency fund after suffering the consequences of a natural disaster. For instance, if you live near the ocean and a storm causes severe damage to your house, you can use the money from the emergency fund for your living expenses, until you receive insurance pay-out.

Another case where you would access your emergency fund is if you encounter an unfortunate accident, that leaves you with a high medical bill. If your insurance company refuses to cover up the damages, you can rely on your savings to help you get access to the medical care that you need.

Similarly, if you end up requiring medical treatment for an illness that your insurance is not paying for, your emergency fund can function as your ‘ticket’ to health. Although planning for potentially catastrophic situations is distressing, it is extremely important to take the initiative of financially preparing yourself to deal with these unfortunate events.

Considering the sensitivity of these situations, you have to certify that your emergency fund comprises of a liquidated asset. In order to deal with the issues, you need to have your hands on your money, as soon as possible, therefore, keep this in mind when you select the options of choosing a saving facility.

Fast-track the process

The entire process of setting aside a certain amount of money can be mentally exhausting. If you do not want to constantly live with the conscious decision to save, you can fast-track the process by increasing the amount of payment you make to your emergency fund. This way, it would take you less time to reach your objective. In order to increase the speed of the whole process, you can introduce a few temporary changes to your life, so that can reap a greater reward in the future.

Consider cutting down your expenses

In order to make larger payments to your emergency fund, you would have to sacrifice on some luxury. For instance, you can cancel your subscription to streaming services, you can use public transport to cut the cost of commute or you can even make smart decisions while shopping for food and groceries. Additionally, you can try switching to a frugal way of living for a few months, until your emergency fund has reached its target amount.

Get a part-time job

Getting a part-time job would increase your monthly income. If you and your partner pick up some extra shifts at weekend, you can bring in more income that could be allocated to your rainy-day fund. Part-time jobs include freelancing opportunities, as well as working at restaurants, driving for ride-sharing services, or working as a delivery person.

Change your job

If the job that you are currently working at fails to cover your financial needs, you can consider switching to a higher-paying alternative. However, before making such a drastic change, make sure that you apply for a job that you really want to do and which offers a market-competitive salary. Changing your job may not be a comfortable transition, but if it allows you to earn significantly more than your current position, you would benefit from this change even after your emergency fund has reached its goal.


An emergency fund is not a luxury, rather it is a necessity that can bail you out at the most difficult moments of your life. To build your emergency fund, determine the amount that can be utilised for three to six-month period, and find the right facility to save it.  You must make regular payments and avoid the temptation to borrow from it. In addition to this, always make sure that you can access emergency fund money at any time!

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