4-minute read

Key take-outs

• An emergency fund is your financial safety net, and helps you cover unexpected expenses such as car repairs, medical bills, or job loss
• Aim to save 3-6 months of living expenses
• Start with an achievable target, use automatic transfers to save, and grow from there
• Keep your emergency funds in a separate, accessible, dedicated account

What is an emergency fund?

An emergency fund is your financial safety net, designed to help you cover costs without needing to borrow money or rely on high interest credit. It can also help cover your regular expenses if you have a drop in income and need to cover a few months’ worth of living expenses.

A 2025 Finder survey of over 1000 Australians showed that 37% – equivalent to 7.9 million people – don’t have enough savings to cover three months of essential living costs.

Building an emergency fund doesn’t require a large amount of money upfront. Even a small amount could make a difference. The key is to start saving, stay consistent, and create a buffer that protects your financial wellbeing now and into the future.

Why might you need an emergency fund?

Financial emergencies are more common than many people realise. Without an emergency fund, even a small financial shock can escalate into long-term financial hardship. You may need emergency savings for things such as:

• Car repairs for breakdowns, parts or unexpected servicing
• Medical costs such as dental procedures, specialist visits, or medications
• Job loss or reduction in income
• Home emergencies such as a broken appliance, leaking roof, plumbing or electrical issue
• Unexpected travel at short notice if you have a family member overseas and need to visit for medical or other purposes

Without a financial safety net, these situations may lead to increased debt, financial stress, or long-term financial instability.

How much money should you have in an emergency fund?

Aim to have enough in your emergency fund to cover three to six months’ worth of living expenses. If you’re self-employed or don’t have a regular income, you might want to save more. Your monthly expenses may include:

• Rent or mortgage payments
• Groceries
• Utilities
• Insurance
• Loan and credit card repayments
• Transport

Emergency fund calculator

You can use our budget planner to work out your monthly expenses. Once you know how much your expenses are, multiply them by the number of months you would like to cover. This will be the savings figure you're aiming for.

If saving months’ worth of living expenses feels overwhelming, start with a smaller savings goal. Although we've all got different needs, you might aim to have $500 – $1,000 put aside for short-term, unexpected expenses. Saving just $10 a week adds up to over $500 in a year. Even if this isn't enough, having this much saved could go a long way when you need it.

What else could your emergency fund help cover?

While many people think of major financial emergencies such as car repairs or a broken appliance, your emergency fund can also help with smaller but important costs.

You may like to take a look around your home to see what you might need to repair or replace (keeping in mind that repairing can cost as much as it does to replace sometimes) or by speaking to some of your friends that have had unexpected medical costs. Other costs an emergency fund might help cover are:

• Vet bills
• School-related expenses
• Urgent home maintenance
• Temporary childcare costs
• Covering gaps while waiting for insurance claims

Emergency expenses are generally unplanned, necessary, and time sensitive. It’s important not to use your emergency fund for holidays or other forms of discretionary spending.

How to create an emergency fund

Often the hardest part of creating a savings fund is just getting started. Here’s how you could make it manageable.

1. Set a savings goal: Start with a realistic goal based on your income and budget. This could be your first $1,000, or just one month of living expenses.
2. Open a separate account: Consider keeping your emergency savings in a separate savings account. This helps reduce the temptation to spend the money on non-emergency things. Some people choose an account with instant access to be able to use it quickly in an emergency.
   
   Westpac Life is a savings account which allows you to divide your savings into different categories, set different savings goals, and earn bonus interest each month you grow your savings.
   
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3. Automate your savings: Explore automatic transfers from your everyday account into your emergency fund. This way, you don’t need to remember to move money and don’t get tempted by seeing it in your everyday account.
4. Reduce unnecessary spending: When you’re opening a new savings account, it can be a good idea to review your existing expenses and identify areas of unnecessary spending. Look at subscriptions, direct debits, and memberships.
5. Use extra cash wisely: If you receive a tax refund, bonus, or other extra money, consider adding it to your emergency fund. This can help you build it up faster.
6. Rebuild after use: If you need to use your emergency fund – after all, that’s what it’s there for – make a plan to start rebuilding it as soon as possible.

Do you need an emergency fund if you have insurance?

Many people assume that insurance removes the need for an emergency fund, but this isn’t the case. No matter what stage of life you're at, it's a good idea to review your insurance regularly to ensure you have the right cover.

Insurance can help cover certain events, but it often comes with waiting periods, excess payments, and coverage limits.

For example, health insurance may not fully cover an unexpected medical bill, car insurance may require upfront payments, or income protection may not provide immediate support.

An emergency fund could complement insurance by:

• Covering out-of-pocket costs
• Providing money quickly when needed
• Bridging gaps before claims are processed

Together, they help provide stronger financial security.

Emergency fund vs other savings

An emergency fund is different from your general savings or other financial goals. While a regular savings account might be used for planned holidays, home upgrades, or future purchases, your emergency fund might strictly be a financial safety net for unexpected expenses.

An emergency fund is also different from investments, which are designed to grow your money over time but don’t offer the instant access or stability you need in an emergency.

To sum up

An emergency fund is an important step in improving your financial wellbeing. It acts as a safety net, helping you manage unexpected expenses without falling into debt or financial hardship.

While the goal may be to save three to six months’ worth of living expenses,  even a small amount can help.

Life is unpredictable, but with the right plan in place, you could be better prepared for whatever the future brings!