Prepare for the Unexpected With an Emergency Fund

This article is general information only and doesn’t take into account your personal situation. It’s not financial advice. For guidance specific to your circumstances, consider speaking with a licensed financial adviser.

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Car repairs, a broken appliance, an unexpected bill. Life has a habit of throwing costs at you when you least expect them. An emergency fund (sometimes called a rainy day fund) is simply money set aside specifically to cover those moments, so an unexpected expense doesn’t have to turn into a financial setback.

Here’s how to think about building one, even if you’re starting from zero.

What is an emergency fund?

An emergency fund is a separate pool of savings kept aside for genuine emergencies, things like losing your job, an unexpected medical bill, an urgent car or home repair, or a sudden drop in income. It’s different from your everyday savings or a holiday fund, because it’s there specifically so you’re not caught out when something goes wrong.

Having one can help you avoid reaching for high-cost credit or dipping into savings meant for other goals every time something unexpected comes up.

How much should you have in an emergency fund?

There’s no single right answer, it depends on your income, expenses and personal circumstances. As a general guide, some people aim for around 3 to 6 months of essential living expenses (rent or mortgage, utilities, groceries, insurance and minimum debt repayments). Others start smaller, aiming for a few hundred dollars as a first milestone before working toward a bigger buffer.

If a 3 to 6 month target feels out of reach right now, that’s okay. Even a smaller fund can soften the blow of a one-off expense, and you can keep building from there.

How to start building an emergency fund

1. Look at what you actually spend

Before you can set a savings goal, it helps to know where your money is going. Take a look at your regular expenses over the past month or two to get a realistic picture. Our Budgeting & Insights tools can help you see your spending patterns at a glance.

2. Set a realistic goal

Start with a smaller, achievable target, like $500 or $1,000, rather than aiming straight for 6 months of expenses. Hitting an early milestone can help keep you motivated to keep going.

3. Automate your savings

Setting up an automatic transfer to a separate savings account on payday means your emergency fund grows without you having to think about it every time.

4. Keep it separate

Keeping your emergency fund in a different account to your everyday spending money can help you avoid dipping into it for non-emergencies. Look for an account that’s easy to access when you actually need it, but not so easy that it’s tempting to use for everyday spending.

5. Top it back up

If you do need to use your emergency fund, try to treat rebuilding it as a priority once things settle down, so it’s ready again for next time.

Where should you keep an emergency fund?

Most people keep their emergency fund in an easily accessible savings account, sometimes called an at-call or online savings account, rather than locking it away in a term deposit or investment. The priority is being able to get to the money quickly if you need it, not necessarily earning the highest possible return.

Building an emergency fund around your home

Home-related costs, like an appliance breaking down or an urgent repair, are some of the most common reasons people dip into savings. Our guide on how to build a home emergency fund looks specifically at planning for these kinds of costs around the house.

What if an unexpected expense lands before your fund is ready?

Building an emergency fund takes time, and life doesn’t always wait for your savings to catch up. If an unexpected cost lands early in the year or before you’ve built much of a buffer, our guide on how to manage unexpected expenses early in the year has some practical, non-borrowing ways to work through it.

If you do need a bit of extra help in the short term while you’re still building your fund, a Beforepay Pay Advance is one option some people use for smaller, essential costs, up to $2,000 with no traditional credit checks, and funds available in as little as 5 minutes for approved customers. It’s best treated as a last resort for a genuine short-term gap, not as a substitute for building your own buffer over time.

Start small, stay consistent

An emergency fund doesn’t need to be built overnight. Assess your expenses, set a realistic goal, automate what you can, and keep chipping away. Even a modest buffer can make a real difference the next time life throws you a curveball.