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Emergency funds: Sleep easy knowing you’ve got emergencies covered

Having an emergency fund saved can help ease financial stress. See how much your should save and our helpful tips on getting started.

August 2020 – 3 minute read

Key takeaways from this article:

  • Why it’s important to have an emergency fund set aside.
  • How to save an emergency fund, even on a low income.
  • How much savings should I have in case of an emergency?


There are many things that keep Australians awake at night when it comes to their money. One way to help reduce these concerns is having an emergency fund set aside. Being able to delay the immediate effects of a financial crisis allows you time to thoughtfully plan out how you can deal with the situation should it arise.

How much savings should I have in my emergency fund?

As a rule of thumb, it’s recommended that 3 to 6 months’ worth of your regular expenses is a suitable amount to have set aside in case of an emergency.  So, check your monthly budget or go through last month’s bank statements to estimate the amount you need each month, then multiply that by the number of months you would like to be covered for. This is then your target.

Next, think about when you would like to have that amount saved by – 6 months? 12 months?  Take your target amount and divide that by the number of months to calculate the amount you need to save each month. You may need to adjust your target amount, or target timeframe to ensure you can manage that amount within your budget. Or maybe you’re wondering how to save money fast, so you can get your emergency fund in place as soon as possible. In this case, you may need to temporarily reassess your spending, perhaps foregoing some little luxuries, and save aggressively for a period of time.

Where should I keep my emergency fund?

Given the savings are for emergencies it would make sense to have the money easy to access. You don’t want to be delayed by trying to break a term deposit or sell some shares, so an easy to access online account would work well. It also doesn’t hurt to have a little cash stashed somewhere safe for situations when you’re not able to access your money electronically.

Tips to help you get there.

  • Set a realistic target and don’t make it too difficult for yourself. If you set a target, then keep falling short you may become disheartened and not be motivated to continue.
  • If you’re trying to save on a low income, even if you only start with a small amount, start as soon as possible and keep adding. Even small amounts add up over time.
  • Keep the money separate from your spending money so you’re not tempted to use your savings for everyday spending. You may wish to open  a separate account, or perhaps use an offset account if you have a home loan.
  • Set up an automatic payment from your pay or transaction account and continue to add to your emergency fund regularly.
  • It may be helpful to reward yourself as you reach certain milestones. Celebrating achievements encourages you to keep going.

Tips to help you stay covered.

  • Review your expenses regularly to ensure any increases, like an upgrade to your mobile plan or an increase in an insurance premium, are also built into your emergency fund.
  • Be disciplined about when you use your emergency fund. Set yourself some rules about when you can and cannot use your emergency fund.
  • Remember to top it up again if you do need to dip into it.

If it helps, think of your emergency fund as a kind of self-insurance where you control the premiums, the claims process, and the payout.

Knowing you’re covered to ride out a short-term financial pinch helps ease concerns, potentially helping you get a better night’s sleep.

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Things you should know

This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness for the information to your own circumstances and, if necessary, seek appropriate professional advice.

© Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.