Why it comes first
Without savings, a £1,000 boiler repair or car bill goes on a credit card at 25% or more, or an overdraft at around 40%, and one surprise can turn into months of debt. An emergency fund breaks that cycle.
It also buys you time if your income stops. Statutory Sick Pay is £123.25 a week from April 2026 if your employer pays no more, and benefits such as Universal Credit can take five weeks to arrive. A few months of savings covers the gap.
How much do you need?
Add up your essential monthly costs only: rent or mortgage, Council Tax, energy, water, food, travel 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 £1,800 a month mean a fund of £5,400 to £10,800.
- Saving £100 a month 4 years 6 months
- 54 months
- Saving £200 a month 2 years 3 months
- 27 months
- Saving £300 a month 1 year 6 months
- 18 months
- Saving £450 a month 1 year
- 12 months
Interest in a good easy-access account or Cash ISA shortens this a little. Windfalls, like a tax refund or part of a bonus, shorten it a lot.
Where to keep it
| Account | Good for | Watch out for |
|---|---|---|
| Easy-access savings | Money you can get the same day, and a decent rate | Rates that drop after a bonus period ends |
| Easy-access Cash ISA | Interest that’s always tax-free | Some ISAs limit withdrawals; check it’s flexible |
| Premium Bonds (NS&I) | Money backed by the Treasury, with a chance of prizes | No interest: you could win nothing |
| Notice or fixed-rate saver | A higher rate, for money beyond the first few months | You can’t get at it straight away |
Most people pay no tax on savings interest: the Personal Savings Allowance makes the first £1,000 a year tax-free for basic-rate taxpayers and £500 for higher-rate taxpayers. Your savings are protected by the FSCS up to £120,000 per person, per banking licence.
Don’t keep it in investments: markets can fall just when you need the money.
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, into a separate account or a savings pot in your banking app.
- Add windfalls: part of a bonus, tax refund or pay rise.
- Once you have a starter fund, make sure you get your full employer pension contribution and clear expensive debt, then build the rest.
If you get Universal Credit and work, ask about Help to Save: the government adds a 50% bonus to what you save, up to £50 a month.
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. When you use it, top it back up before going back to other goals.
The savings interest calculator shows what your fund earns, and any tax due.