Unexpected expenses can feel like they come out of nowhere — a car repair, a medical bill, or even a leaky roof. If you’re living on a tight budget, the idea of saving for emergencies might seem impossible like it did for me.
Here’s the good news: building an emergency fund doesn’t require a massive income or drastic lifestyle changes. With small, consistent steps, you can create a safety net that brings you peace of mind and a sense of security.
Important note on this post: I am not a financial professional. While I do wholeheartedly believe in what I write, this guide is for informational purposes only. If you’re really struggling, I highly recommend for you to get yourself some professional advice. For those that live in the UK like me, that can begin at Citizens Advice (a free service). There is no shame in asking for help! You deserve to be happy and healthy.
If you’re working towards financial stability, you’ll love my tips on how to save money in your 20s and build wealth even with kids.
Why an Emergency Fund Matters
I’ll tell you a quick story to illustrate this point… a few years ago I bought a car in a private sale for £2000. I loved it! It had loads of space for the kids and a massive boot (trunk for my American friends 🇺🇸). Not relevant details, of course. I drove it for two weeks before it broke down! It sat on my driveway for months dreaming of a big strong mechanic to come and fix it (aren’t we all). The point is, I hadn’t called because I hadn’t planned for it in the budget, and I was terrified the big strong mechanic we all know and love was going to come and bankrupt me. Not a fun time.
All that to say: life loves to throw surprises at us, and not all of them are the good kind. An emergency fund is your cushion, your backup plan, and your way to handle life’s curveballs with less stress and more confidence. It’s not just about money — it’s about creating stability for you and your family! With everything on your plate, you deserve to be free from financial stress, you really do.
One of the best ways to free up extra cash is by cutting down on unnecessary spending—check out these 21 frugal living tips that have saved my family hundreds.
Step 1: Set a Realistic Goal
You don’t need to save thousands overnight. The key is starting small and building up over time. Here’s how to approach it:
- Start Small, Dream Big: Begin with a mini goal, like £500 or one month’s essential expenses. Even a little can make a big difference.
- Your Long-Term Safety Net: Once you hit that first milestone, aim for three to six months’ worth of essential expenses. This will help you weather bigger challenges like job loss or unexpected bills.
Step 2: Find Small Ways to Save
Even with a tight budget, there are ways to free up some extra cash without feeling deprived. Start here:
- Cut Back Without Cutting Joy: Skip the things that don’t spark happiness, like unused subscriptions or frequent takeaways. Keep the little luxuries that matter.
- Get Smart with Groceries: Plan meals around sales, shop your pantry first, and avoid impulse buys. If you want to read more about savings on the grocery front – check out my post 10 Practical Ways to Save Money on Groceries without Sacrificing Quality!
- Simple Swaps for Fun: Instead of pricey outings, try a family game night or a picnic in the park.
Step 3: Automate Your Savings
Take the thinking out of saving by making it automatic. Here’s how:
- Small Steps Add Up: Start by saving £5-£10 a week. It’s amazing how quickly small amounts grow.
- Out of Sight, Out of Mind: Use a separate savings account you don’t touch unless it’s an emergency.
- Set It and Forget It: Schedule automatic transfers on payday so saving becomes effortless.
Step 4: Make the Most of Windfalls
I’m not talking winning the lotto – but unexpected money, like a tax refund or birthday cash, is a great opportunity to boost your fund without affecting your budget. Here’s what to do:
- Save First: Put at least half of any windfall into your emergency fund.
- Celebrate Too: Use a little to treat yourself — balance is key.
Not sure where to start with budgeting? Try this simple family budgeting guide to help you take control of your money.
Step 5: Stay Consistent and Motivated
Building an emergency fund is a journey, and staying inspired makes all the difference. Try this:
- Track Your Wins: Use a savings tracker to see your progress. Every milestone is worth celebrating.
- Remember Your Why: Focus on the peace of mind and security you’re creating for your family.
FAQs About Building an Emergency Fund
Q: Should I pay off debts first or build an emergency fund?
A: In an ideal world, aim to save a small emergency fund of £500-£1,000 while continuing to make minimum debt payments. However, this is sometimes not possible and I understand that. Another approach could be to put extra cash towards paying off your smallest debt quickly and then using the extra saved from the monthly payment to build a fund. But if you can manage to build the fund first, the cushion helps you avoid taking on more debt for unexpected expenses. Once you have this safety net, focus on aggressively paying off high-interest debts.
Q: How much should I save in my emergency fund?
A: Start with a goal of £500 (or an appropriate ’emergency amount’ in your currency!) to cover minor emergencies. Over time, work towards three to six months’ worth of essential expenses for a more robust safety net – this is the dream.
Q: What counts as an emergency?
A: Emergencies are unexpected, necessary expenses like car repairs, medical bills, or urgent home repairs. Non-essentials like a new phone or holiday are not on the menu!
Q: How can I save if my budget is already tight?
A: Focus on small changes like cutting unused subscriptions, meal planning, and reducing discretionary spending. Even saving £5-£10 a week adds up over time. I caught myself paying £16 a month for NOW TV which I bought just to watch Game of Thrones, I had the subscription for well over a year after I finished the series!
Q: Where should I keep my emergency fund?
A: Use a separate savings account that’s easily accessible but not linked to your primary account. Look for accounts with no fees and a competitive interest rate.
Q: Can I use my emergency fund for non-emergencies if I’m struggling?
A: It really is best to avoid dipping into your emergency fund for non-urgent needs. If you’re struggling, consider adjusting your budget or exploring ways to increase your income before using your fund.
