An emergency fund is a cash reserve set aside exclusively for genuine financial emergencies — unexpected expenses that would otherwise force you into debt or derail your other financial goals.

Why it comes first

Without a cash buffer, any unexpected expense — a car breakdown, boiler failure, dental bill — lands on a credit card or causes you to raid your investments. Either outcome sets back your broader financial goals.

An emergency fund breaks this cycle. Once it is in place, small financial shocks are absorbed without disrupting anything else.

How much to save

Step 1 — Starter emergency fund: £1,000, or one month of essential expenses (whichever is higher). This is the minimum to handle most common emergencies and is achievable quickly.

Step 2 — Full emergency fund: Three to six months of essential expenses. Essential expenses include rent/mortgage, food, utilities, transport, and minimum debt payments — not discretionary spending.

How much within the 3–6 month range?

• 3 months: stable employment, dual income household, low fixed expenses.
• 6 months: self-employed, single income, variable income, or less secure employment.

Where to keep it

The emergency fund must be:

• Accessible immediately — you cannot wait 3 days for a transfer or pay a penalty.
• Not invested — equities can be down 40% exactly when you need them.
• Separate from your everyday spending account — mentally ring-fenced.

Good options: easy-access savings accounts, cash ISA, or Premium Bonds (instant access for prizes up to the prize fund).

What counts as an emergency

Emergency fund money is for genuine, unexpected emergencies only:

• ✓ Car breakdown repair
• ✓ Boiler replacement
• ✓ Sudden medical expense
• ✓ Job loss — the fund gives you time to find a new job without panic
• ✗ Planned expenses (holidays, car tax) — budget for these separately
• ✗ “I want it” purchases — that is not an emergency

Setting up your emergency fund in WealthMgr

1. Create a goal: Goals → Add goal, name it “Emergency Fund”, set target to your calculated amount.
2. Create (or use an existing) easy-access savings account in Accounts.
3. Allocate part of your paycheck to the emergency fund goal pocket each month.
4. Once the goal is met, redirect that allocation to your next priority.

Replenishing after use

If you spend from the emergency fund, treat replenishment as your top priority — higher than investing or extra pension contributions — until it is back to target.