I've never been a natural saver. Before I even hit my twenties, I was buried in personal debt and spent five years on a debt management plan paying it all back. So the idea of having money sitting untouched in a savings account felt deeply uncomfortable for a long time, especially as I have some debt to pay.  

But things change. Responsibilities change. And the older I've got, the more I've understood that an emergency fund isn't something you save so you can feel smug about it. It's something you save so that when life goes wrong - and it will - you don't have to panic about how you're going to pay for it.

We know this from experience. More than once.

After a recent incident, we really needed those funds. And our emergency fund in recent years has bought me peace of mind for several reasons, and I now see it as a necessity and a priority, not just something that's nice to have, or lucky to have.  We've worked hard and always made sacrifices to save every penny of our emergency fund.

What an emergency fund actually is

An emergency fund is money saved specifically to cover unexpected costs or a sudden loss of income. It's not your holiday fund, it's not house savings, it's not a general pot you dip into when you see something you want. It's ring-fenced money that sits there quietly until you genuinely need it.

The general advice is to save three to six months' worth of essential outgoings - mortgage or rent, food, bills, basic living costs. Not luxuries, not treats - just the amount you'd need to keep the household running if your income stopped or dropped significantly.

For us, six months of essential outgoings works out to around £18,000. Years ago our target was £10,000, but with the rising cost of living and a higher mortgage, we recalculated and increased the goal to properly reflect what six months of essential bills actually costs us now. If you saved your fund years ago, it's worth revisiting whether the amount still reflects your real outgoings - costs have risen significantly for most households.

The reasons you genuinely need an emergency fund

Illness or injury

If you're employed, your employer may only cover sick pay for a limited period. If you're self-employed, there's typically no sick pay at all - you stop working, you stop earning. Even a few weeks out of action can have a significant financial impact without a buffer in place.

Ben and I are both self-employed, which means our emergency fund effectively acts as our sick pay. There's no employer safety net. If either of us can't work for an extended period, the fund will be what covers the gap. Knowing how to manage money month to month on a variable income is hard enough at the best of times - doing it without any savings buffer is genuinely risky.

Redundancy

No job is guaranteed. Having several months of essential outgoings covered gives you time to find something new without making panicked decisions or taking on debt. It removes the pressure to accept the first thing that comes along, which can make a real difference to where you end up.

Car repairs

Cars break down at the worst possible times. If your car is essential for work or family life, an unexpected repair bill can't wait. Our emergency fund has covered car repairs more than once - without it, those bills would have gone on a credit card or a loan. Unexpected costs are also one of the biggest reasons loan repayments can become difficult to manage if you don't have anything set aside.

Household appliances

Boilers, fridges, washing machines - they all fail eventually, usually at inconvenient moments. An emergency fund means a broken appliance is an inconvenience rather than a crisis. We've been waiting for our oven to give up the ghost for some time, and knowing the fund is there means it won't be a financial emergency when it finally does.  It's 20+ years old now and we've replaced the heating element twice in the past 5 years, so it feels only a matter of time!

Family emergencies

This is the one that hit us hardest and that I didn't fully anticipate when I first started saving. Our daughter had an extended hospital stay. Both Ben and I are self-employed, so we had no annual leave pay and our income dropped significantly during that period. The emergency fund meant we didn't have to worry about the mortgage or the bills on top of everything else that was happening. It let us focus on what actually mattered.

That is what an emergency fund is really for. Not just the broken boiler or the car that won't start, but the genuinely difficult situations that life occasionally throws at families.

Why it matters even more if you're self-employed

If you have a steady employed income with sick pay and redundancy protection, your employment provides some cushion. If you're self-employed - as both Ben and I are - there is no cushion unless you create it yourself.

An emergency fund is your self-employed sick pay. It's your redundancy payment. It's the financial stability that employed people get as part of their contract, rebuilt from scratch by you. For anyone whose income varies from month to month, building an emergency fund on irregular earnings requires a slightly different approach - but it's even more essential, not less.

Right now we're sitting at £10,000 after the withdrawals we've had to make. We're holding it there rather than letting it drop further while we focus on paying down debts first - but we're not willing to let it fall below that floor in case another emergency hits before we've had chance to rebuild.

Should you save an emergency fund before paying off debt?

This is a question worth addressing because it's one a lot of people wrestle with. The instinct is often to throw everything at debt first and save afterwards. But if you have no buffer at all and something unexpected happens, you'll likely end up taking on more debt to cover it - which can set you further back than if you'd had a small fund in place from the start.

Our view is that having even a small emergency fund saved before aggressively paying off debt gives you a layer of protection that makes the debt repayment more sustainable. The two things aren't mutually exclusive - you can do both at a measured pace rather than going all in on one and leaving yourself exposed.

The peace of mind is worth it

I didn't understand the value of financial security until I'd experienced the alternative. Growing up without savings, taking on debt before I understood how to manage money, scrambling to cover unexpected costs - all of it was stressful in a way that affected everything else.

Having an emergency fund changes how you feel day to day. Not because the money makes you rich, but because you know that if something goes wrong - really wrong - you have a way to handle it. The hospital stay would have been a financial crisis on top of everything else without ours. Instead, it was stressful enough on its own terms, without the added panic of not knowing how we'd pay the bills.

That feeling of security - the knowledge that you can absorb a shock without immediately going into debt - is genuinely worth every pound you put in. Even if you can only start small.

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Before you go...

Getting your overall finances in a healthy place makes building an emergency fund much more achievable - small consistent habits make a bigger difference than most people realise. And if you're looking for ways to build the fund faster, real ways to make extra money from home covers some of the most accessible options.