Build an emergency fund for those unexpected costs
July 2025 PayPlan Blog #1
Life has a way of throwing curveballs at us when they’re least expected, from redundancy to car repairs to home emergencies, these unexpected events can come with large price tags.
Having an emergency fund in place provides an extra safety net when life doesn’t go to plan.
What is an emergency fund?
An emergency fund is a savings pot for unexpected costs – see it as a ‘financial first aid kit’.
Why should I start an emergency fund?
Having an emergency fund in place can provide peace of mind knowing that you have a cushion available for unexpected costs. It can help you stay on track financially even when you experience curveballs. This could help you avoid debt because you have the money set to one side rather than having to rely on credit during tough times.
How much should I save?
We’d recommend trying to save three to six months’ worth of your essential bills. Make sure you include rent or mortgage, council tax, utility bills, food, transport costs, childcare and insurance.
If this might be too much of a struggle, start small, even having a small pot tucked away will help with those unplanned costs. By setting yourself small milestones, you can keep going without feeling overwhelmed.
How to start your emergency fund
- Make it a priority – set up a standing order to go out to your savings pot on payday.
- Find small ways to save – you could cancel unused subscriptions or cut back on a takeaway a month.
- If you receive money as a gift, save it – any bonuses or cash gifts can give your emergency fund a boost.
- Put your emergency fund in a savings account – setting the money aside and into a savings account will help you resist dipping into it for non-emergencies and you’ll also earn some interest in the meantime.
When should you use an emergency fund?
Only use your emergency fund for true emergencies. Ask yourself these three simple questions – if the answer is yes to all three, that’s what the fund is for.
- Is this expense unexpected?
- Is it urgent?
- Is it necessary?
What you can do next
If you are struggling with debts call us on 0800 072 1206. We’re open from 8am – 8pm Monday to Friday and 9am – 3pm on Saturdays.
Alternatively, you can visit our www.payplan.com/bfawu to speak to us via live chat or for more information.