A common target is three months of essential costs, in a separate easy-access account. If your essentials are £2,020 a month, that is £6,060. Six months gives a bigger buffer. There is no official figure, so treat this as a sensible place to start.
The AA, for one, describes the goal as a minimum of three months of essential living costs, with six months as a larger cushion. You will see the same range quoted across UK savings guides. It is a rule of thumb and nothing more, so the useful part is working out what it means for your own costs and your own risks.
Start with essentials, not income
An emergency fund pays for the things you can't stop paying if your income drops: housing, council tax, energy, food, travel to work, insurance and minimum debt payments. Holidays and subscriptions drop out, and so does the yearly bills pot, since you can usually pause that for a while.
Using the invented household from our budget example, essentials come to £1,960 plus a £60 card minimum, so £2,020 a month.
| Cover | Target | At £150 a month |
|---|---|---|
| First stop | £1,000 | 7 months |
| One month | £2,020 | 14 months |
| Three months | £6,060 | 41 months |
| Six months | £12,120 | 81 months |
Invented figures. Months rounded up, ignoring interest. The £1,000 first stop is our own suggestion of a milestone, not official guidance.
Those timings are long, and we'd rather say so than pretend otherwise. Three months of costs is more than three years away for this household. That is why a first stop helps: it pays for many everyday shocks, such as a boiler callout or an unexpected trip, well before the full target arrives.
Who might want more, or less
The right cover depends on how fast your income could stop, and what would replace it. Some things that push the figure up:
- You are the only earner in the household.
- You are self-employed, or your hours vary.
- Your employer pays only the statutory minimum when you are off sick.
- You own a home or a car that you depend on, and a repair would fall to you.
Two earners on steady contracts with good sick pay may reasonably sit nearer the lower end.
What statutory sick pay would actually cover
This is the sum that makes the case most clearly. Statutory Sick Pay is up to £123.25 a week at the current rate, paid by your employer for up to 28 weeks. Over a year that rate works out at about £534 a month.
| Per month | Amount |
|---|---|
| Essential costs | £2,020 |
| SSP (£123.25 × 52 ÷ 12) | −£534 |
| Gap each month | £1,486 |
Before you assume this applies, check your contract, because your employer may pay more than the minimum. Your partner's income or benefits might also fill some of the gap.
Where to keep it
Quick access matters more than the top rate of interest. The AA's advice is an easy-access account with a regulated provider, held apart from your everyday money. A separate account also makes it less likely you will spend the money on something that isn't urgent.
Three things to check:
- Protection. FSCS protection covers up to £120,000 per eligible person, per bank, building society or credit union. Banks that share a licence count as one, so check who stands behind your account.
- Access rules. Some accounts limit withdrawals or need notice. Read the terms before you rely on one for an emergency.
- Tax on the interest. Most people with modest savings pay none, but our guide to tax on savings interest sets out the limits.
The benefits catch
If you claim, or might claim, Universal Credit, savings can affect it. GOV.UK says that below £6,000 your award is not affected. Between £6,000 and £16,000, your payments fall by £4.35 for every £250, or part of £250. Above £16,000, you usually can't claim at all.
For our household, the three-month target of £6,060 sits £60 over the line, which would reduce a Universal Credit payment by £4.35. The six-month target of £12,120 is £6,120 over, which makes 25 steps and a reduction of £108.75. That doesn't make saving a bad idea, but it is worth knowing, and the rules for your own claim are worth checking with your adviser.
What counts as an emergency
It helps to decide this before you need the money, because the decision is harder at the time. We'd suggest two questions. Is it necessary, and did you not know it was coming? A broken boiler or a sudden loss of pay passes both. A holiday fails both, and a known bill like the MOT belongs in your yearly bills pot.
When you do spend it, that is the fund doing its job, so there is no failure to feel bad about. Go back to your regular monthly transfer and rebuild from there.
Savings or debt first?
This is a real question if you have expensive debt. Interest on a credit card is often higher than interest on savings, which argues for paying down the card. Yet a household with no cash at all may simply borrow again when the washing machine breaks. Many people do a bit of both: a small first stop, then a push on the debt. Which is right depends on your rates and how secure your income is.
If you already have arrears, the order is different: priority bills come first, and it is worth speaking to a free debt adviser before you put money aside. Citizens Advice can point you to one. Once the buffer exists, longer-term saving such as a workplace pension becomes easier to leave alone.