Emergency Fund

An emergency fund is a cash reserve for genuine financial emergencies only — 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 forces you to sell investments at the wrong time. Either outcome sets back your broader financial plan.

An emergency fund breaks this cycle. Once it is in place, 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 covers most common emergencies and is achievable quickly.

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

Where in 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 — no waiting three days for a transfer or paying a penalty to access it.
• Not invested — equities can fall 40% exactly when you need them.
• Separate from your everyday spending account — mentally ring-fenced.

Good options: easy-access savings accounts, cash ISAs, 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 buys time to find a new role 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: Budgets & Goals → Add goal, name it “Emergency Fund”, set the target to your calculated amount.
2. Open (or create) an easy-access savings account under Accounts.
3. Allocate part of each paycheck to the emergency fund goal pocket.
4. Once the goal is met, move that allocation to your next priority.

Replenishing after use

If you spend from the emergency fund, replenishment is your top priority — above investing and extra pension contributions — until the fund is back to its target level.