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  • Naomi Harris

3 Reasons For an Emergency Fund

The final post in our Budgeting Series covers the importance of creating an Emergency Fund as part of your budget.

After the events of the past year, many of us have found ourselves in financial difficulty through no fault of our own. To help protect your long-term financial health, planning for the future is critical. An Emergency Fund helps protect you, and your family, from potential future financial difficulty.

What is an Emergency Fund?

Did you know, 1 in 3 Brits do not have a £1,500 fund available, and 15% of Brits have no savings at all? (Source: Global Banking and Finance Review)

An Emergency Fund is absolutely essential to protect you from going into debt and facing financial insecurity, because you don't have to rely on insecure loans to get you through a difficult financial period.

It is a savings pool for unexpected or emergency expenses.⁠ Ideally you should save about 3-6 months worth of regular living expenses. However, at the beginning of your financial journey, saving around £1000-£1500 is a good start.⁠

It's also important to note that your Emergency Fund should not be locked away in investments or a hard to access savings account. Your Emergency Fund is something you should be able to access straight away with no penalties or restrictions.

Examples of emergency and non-emergency spending needs
Is this really an emergency spending need?

Why would I need one?

1) If you only have one source of income

Having only one source of income can be dangerous if you go through an unexpected job loss or illness. However, an Emergency Fund can help you cover your basic living costs until you can work again.

2) You can be more prepared

An Emergency Fund can help cover any unexpected bills or emergencies. For example, you car might suddenly need repairs, or you might need to travel abroad at the last minute for a family emergency. Without this fund it could be a struggle to pay any sudden, large costs and would increase your risk of going into debt.

3) Helps you practice good money habits

Compiling an Emergency Fund is no easy task, it is not something that happens overnight. Despite this, paying a fraction of your wage into a fund each week or month helps you build up a good habit of saving. It is an important practice to learn.

If you need some budgeting inspiration, take a look at our previous post; Budgeting Methods or our full Budgeting Series.

The Money Advice Service also have a great article which looks at the different emergency cost (e.g. car repairs, broken washing machine, unexpected tax bill, etc), how often they occur on average in a 12 month period, and how much this would cost you. This is a great benchmark to help you decide how much you want to save in your Emergency Fund.

By identifying your individual needs and how much you can afford to part with each month, you can begin the process of building your Emergency Fund. As you can see, an Emergency Fund is the first step you should take in transforming your finances to protect from any future issues.


The ImageNPay app is perfect to help you budget your spending. With a £120 monthly spend cap on our standard plan, our digital prepaid card can help you stay within your budgets monthly limit. You can download for FREE on iOS in the UK.

Find out more about the benefits of prepaid here.


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