An unexpected car repair or medical bill is stressful enough without having to borrow to cover it. An emergency fund is money set aside for exactly those moments.
Start small, but start
ASIC's Moneysmart makes the point that even a little helps. Its example: putting $20 a week into a savings account gives you over $1,000 in a year. Moneysmart suggests a good target is enough to cover three months of expenses, and more if you want extra protection, for example if you might need time off work to care for family.
Work out your number
A budget helps you see your monthly expenses. Multiply that by the number of months you want to cover, and you have a savings goal. Moneysmart has a free budget planner and savings calculator for this.
Make it easy to keep going
Separate account: keeping the fund apart from everyday money makes it less tempting to dip into.
Automate it: a regular automatic transfer on payday means you do not have to remember.
Offset account: if you have a home loan with an offset account, Moneysmart notes it can double as an emergency fund while reducing interest.
Use it for emergencies
Decide in advance what counts as an emergency, and top the fund back up after you use it.
This article is general information only and does not consider your personal circumstances. It is not financial advice.
About the author
RullikClear, sourced explainers on Australia and the world
Rullik is the pen name of the founder of Australia Illuminate (Auslume). Rullik writes plain-language explainers on life in Australia, from immigration, study and work to money, sport and screen culture, always linking to the official sources behind each story. Every story is reviewed before publication.
More from Rullik ↗This article was prepared with AI assistance.
