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5 steps to create an emergency fund now

5 steps to create an emergency fund now
Image source: Getty Images.

While we cannot predict the future, we can at least plan for the possibility that some unplanned event may occur. How exactly? By setting up a financial cushion in the form of an emergency fund.

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An emergency fund can provide a safety net for unexpected expenses, such as car and home repairs, dental emergencies, or, particularly in the current climate, a job loss.

But for many people, particularly those on low-incomes, putting away money for a rainy day is easier said than done. In fact, did you know that half of Brits had no savings pre-pandemic?

Yet, while it may seem hard, it’s not entirely impossible to start an emergency fund. Here are 5 steps you can take to create one right now.

1. Create a budget

Begin by tracking your expenses. This will help you see where your money is going. You’ll see your current spending habits and areas where you can save money.

After tracking their spending for a few weeks, most people are surprised to discover how much they spend on small and unnecessary things.

With better knowledge of your spending habits, you can create a budget that is specifically designed to help you save money for your emergency fund. But you have to stick to it!

2. Cut back on non-essential spending

Look for areas of discretionary spending that you can put on hold or where you could spend less. Here are few common expenses that you can consider cutting back on (at least until you have saved up enough for an emergency fund):

  • Eating out regularly
  • Expensive gifting
  • Monthly magazine subscriptions
  • Buying books instead of using the local library
  • Daily visits to the local coffee shop (those coffees soon add up)
  • Buying new clothes and shoes
  • Driving everywhere (consider ditching the car and walking or biking instead)

3. Declutter and sell

You can fast-track the setting up of an emergency fund and provide a great initial boost through a big declutter of some of your belongings or items that you no longer need.

It could be old clothes, shoes, books, DVDs and so on. You can list the items on places like eBay, Craigslist and even on Facebook sell and swap groups.

4. Use one-time opportunities to save

There are certain times that you receive a one-off influx of money. It could be a tax refund, a bonus from work, an inheritance or a cash gift from a friend or a family member.

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Rather than spending this money, you could save a portion or all it and add it to your emergency fund.

5. Pick up an extra job or side hustle

You could pick up an extra job or side hustle like babysitting, mowing lawns, or delivering fast food, to earn extra income that you can add to your emergency fund. These side hustles require no financial investment on your part and offer quick payment.

What’s the best place to build an emergency fund?

Well, it’s completely up to you where you build your emergency fund. The key thing is to ensure that that you can access the money quickly if you need it since that is the whole point of having it in the first place.

You could, for example, put it in a regular current account at your bank.

An easy-access savings account that you can access at any time with no penalty might even be a better option as you’ll earn some interest on your savings. Even though interest rates are currently pretty low, it still adds a small amount to your pot.

It might, however, not be a good idea to keep the money at home in a jar, or even under a mattress as people did in the olden days. Unless you’re super disciplined, you could all too easily find yourself dipping into it for things that are not emergencies.

How much should you have in your emergency fund?

There’s no fixed answer to this. It depends on your personal situation.

According to the Money Advice Service, however, a good rule of thumb is to aim to build an emergency fund that will take care of your personal living expenses (mortgage, food, utilities, etc.) for at least three months.

As you get started, this understandably might seem a lofty goal. The most importtant thing is to just try to save as much as you can.


An emergency fund is strictly for emergencies, so be sure to ring-fence the money for its intended purpose. Otherwise, you might find yourself in a serious financial hole with nothing to bail you out when a real emergency strikes.

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