Less than a third of families have an emergency fund that provides financial security

Published: December 15, 2022 by Jennifer Armstrong

Two-thirds of families could find themselves in financial difficulty if they face a shock because they don’t have enough saved in an emergency fund, research suggests. Do you have enough saved to cover potential emergencies?

An emergency fund is an important part of creating financial resilience. It means you could maintain financial commitments and your lifestyle even if something unexpected happens. Building an emergency fund can improve your financial wellbeing too, as it can offer peace of mind about the future.

As inflation is high – it was 11.1% in the 12 months to October 2022 – and the UK is expected to fall into a recession in 2023, an emergency fund is more important than ever. It could help create a buffer as costs rise and mean you’re more secure amid the uncertainty.

The average working household has £2,400 in savings

A survey conducted by Legal & General found that the average working household has less than a month’s worth of expenses in an emergency fund – the average is £2,400.

Due to the cost of living rising, more than half of families said they plan to use their rainy day fund to meet everyday costs. 1 in 4 households is already dipping into their savings.

As well as depleting how much is an emergency fund, inflation means families are less likely to continue adding to one. 30% said they have stopped putting money into a savings account as they struggle to meet spiralling costs.

Yet, the research found that having an emergency fund is an important part of having confidence about the future. On average, families said they would need £12,100 in the bank to feel financially secure.

Reaching this goal would not only help families weather financial shocks but could improve wellbeing too. Knowing that you have a financial safety net can ease anxiety.

4 useful tips for building an emergency fund

If you don’t already have an emergency fund, it can be a daunting goal. Here are some tips that could help.

1. Set a target for your emergency fund

While the survey suggested that families would like to have around £12,000 in the bank, you should set your own target based on your circumstances.

Often, it’s advisable to have between three and six months of expenses in your emergency fund. This means you can cover short-term outgoings even if your income stops. So, take a look at what your regular outgoings are. You can then set a target that makes sense for your family.

2. Make a monthly deposit into your savings account

With a target in mind, break your goal down into smaller chunks. It can help make building your emergency fund seem more manageable and easier to incorporate into your budget.

Set a minimum amount you want to add to your savings account each month. Then, make it part of your regular expenses. Setting up a standing order, so the money is moved out of your current account automatically, means you’re less likely to accidentally spend it.

While your overall goal could take a while to reach, celebrate the smaller milestones along the way. It can help keep you motivated and give you confidence that you’re taking active steps to improve your financial wellbeing.

3. Get the most out of your savings

Your emergency fund might be sitting there waiting for a rainy day, but that doesn’t mean you should put it in any account. Shopping around to find an account with a competitive interest rate means your money works harder and you could reach your goal sooner.

As you want to be able to access the money at short notice in case of an emergency, an easy access savings account often makes sense. However, as interest rates have increased this year, it’s still worth looking at what’s available.

Some banks and building societies may also offer you an incentive to move your savings account.

4. Review alternatives before you dip into your emergency fund

Your emergency fund is there for when you face an unexpected shock. If you’re thinking about dipping into it for another reason, review the alternatives first. Could you cut back in other areas? Or delay purchasing until payday?

In some cases, your emergency fund may be your only option, but exploring the alternatives first can help you preserve your savings.

If you are thinking about accessing your savings to cover ongoing costs, you should consider if it’s sustainable. While it could help you cover a soaring energy bill now, how long will your savings last? Relying on your savings could mean you’re in a worse position in the future.

Contact us to talk about improving your financial resilience

An emergency fund is an important first step in improving financial resilience, and there are often other steps you can take too.

Depending on your goals, you may want to consider financial protection or increase your pension contributions. Contact us to talk about your goals and the steps you can take to improve your financial security.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.


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