Why it comes first
Without savings, a €1,000 car repair, a failed NCT or a broken boiler goes on a credit card or overdraft, and one surprise can turn into months of debt. An emergency fund breaks that cycle.
It also gives you breathing space if you lose your job or can’t work. Social welfare payments for people out of work or ill, such as Illness Benefit, help if you have enough PRSI contributions, but they replace only part of most people’s pay. Your fund covers the gap while you get back on your feet.
How much do you need?
Add up your essential monthly costs only: rent or mortgage, groceries, energy, travel, insurance and minimum debt payments. Then multiply:
| Your situation | Aim for |
|---|---|
| Steady job, no dependants | 3 months |
| Family, single income or a less secure job | 6 months |
| Self-employed or income that varies | 6 to 12 months |
Example: essentials of €2,000 a month mean a fund of €6,000 to €12,000.
Where to keep it
- A demand savings account at a bank or credit union, so you can get at it quickly. Banks and credit unions take DIRT at 33% from the interest, so a 3% rate is worth about 2% to you.
- State Savings from An Post: guaranteed by the State and free of DIRT. Some products take a few days to cash in, so keep part of your fund in a bank account too.
- Separate from your current account, so it doesn’t get spent by accident.
- Not in investments. Markets can fall just when you need the money, and selling ETFs or funds can mean paying exit tax.
Savings in banks, building societies and credit unions authorised by the Central Bank are protected up to €100,000 per person, per institution, by the Deposit Guarantee Scheme. Compare rates after tax with our savings interest calculator.
How to build it from nothing
- Start with a small goal, such as €500 or one month of essentials.
- Set up a standing order on payday, even €25 or €50. Many people save weekly with a credit union, and a savings record there can help when you need a loan later.
- Add windfalls: part of a bonus, pay rise or tax refund. If you’ve never claimed the rent tax credit or medical expenses relief, you can claim back four years in Revenue’s myAccount.
- Once you have a starter fund, clear expensive debt and join your employer’s pension if they contribute, then build the rest.
When to use it
Use it for real emergencies: losing your job, urgent repairs, unexpected bills. Not for holidays or Christmas: save for those separately, as part of your budget. When you use the fund, top it back up before going back to other goals.
If you’re already in debt and can’t build savings, MABS gives free, confidential help on 0818 07 2000.