Emergency Fund – Why Do You Need One and How to Build It Fast

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Why Do I Need An Emergency Fund?

No matter how prepared you think you are, unexpected things inevitably happen. And when it comes to money, you want to be covered should some unforeseen event crop up.
Having an emergency fund gives you the peace of mind, that should something happen you will be able to deal with it without resorting to overdraft usage, credit cards or even worse – payday loans.
If the car needs repairs or the fridge breaks down you have a pot of money set aside which you can use to fix it or buy a new one, without leaving you short or unable to pay other bills.

How much you put into an emergency fund is up to you – it is whatever makes you feel comfortable. Some people will have £500 in theirs; personally I get palpitations if mine falls below £1000 but anything is better than nothing at all.
If you don’t have any savings or feel like you don’t have any money spare to save, the idea of building a pot to £500 can feel quite daunting. But that doesn’t mean that you should bury your head in the sand and not start one. Just think about how relieved you will feel when you get there.

First things first, you need to set up a standing order to pay a set amount into your savings each month. Do this first and treat it exactly as you would any other bill – a necessity, non-negotiable. Don’t stretch yourself too far and pay in too much so that you need to dip into it every month as that’s counter-productive. Be realistic with how much you can save each month.

How to build it more quickly

Round Down Your Current Account Balance

When I log in to my banking I round down to the nearest £1 or £10 and transfer this difference into my savings. You’d be surprised how quickly this adds up if you do it on a regular basis and it’s highly unlikely you’ll miss it. (Obviously, if you use a zero based budget approach to your money then these ‘spare pennies’ are not actually spare.)

Cash Envelopes

I’ve sung the praises of cash envelopes as a budget tool in other posts but I often challenge myself to reduce my cash spending. For example our grocery budget is set at £70 a week (which is high, I know but this covers food, top up shops, dog food, cleaning products AND all baby related supplies such as nappies etc) so if I have anything left over from the budget at the end of the week, I’ll transfer it to savings.
If I buy something for £2 and a cashback app gives me £1 back – I’ll transfer the cashback into savings. It’s all about putting every penny to work because they really do make the world of difference.

Sell Things

We’ve all got stuff lying around the house that we don’t use or need anymore. Turn it into cash and use that money to fill up your Emergency Fund more quickly. Ebay is great for selling clothes and shoes, Facebook Marketplace and Gumtree are great for selling larger items (no fees and the buyer collects).

You might also like this post: The Best Places to Sell Unwanted DVDs

Change your change

We’ve all got plenty of cash lying around the place, we probably don’t even realise how much. Last time I took stock of all our loose change and random cash about the place I found £140! Count up all your loose change (search drawers, bags, coats, cars etc – anywhere pennies might be hiding) and bank it. Then transfer this to your savings. It’ll do so much more for you in your bank account than stuffed down the sofa.

Side Hustle

Earn some extra pennies doing surveys in your spare time and transfer your earnings to the emergency fund. See if you can pick up some extra shifts in work and put that in there too. Do you have any skills you could monetise? Focus on earning extra money to build your savings more quickly.

You might also like this post: Making Money with… Populus Live

Reduce your outgoings

Review your current expenses and see if you can make a saving. I recently changed our gas and electricity supply to Bulb and now save £30 a month. (See if you can save money here and if so, join using my referral and we’ll both get £50!)
Once you’ve made the saving, increase your savings standing order by this amount so that you’re not tempted to spend it. Treat it like you never had it or it’ll easily be sucked up elsewhere.

You might also like this post: Why You Should Regularly Review Your Expenses

Hopefully that’s given you a bit of motivation to get building your emergency fund. Just think, once it’s done you won’t have the worry if something happens and you can then put these tips into action to build your savings for other, more exciting goals.


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Hi! I'm Katie

I started Katie Saves while on Maternity Leave to document our adjustment to living on less. Now back in work - I blog about all things money with a little life organisation thrown in for good measure. Join me!