How much should you have in an emergency fund?

Most people should keep three to six months of essential costs in an emergency fund. Essential costs are rent or mortgage, utilities, groceries, transport, insurance and minimum debt payments. If those add up to €2,000 a month, your target is somewhere between €6,000 and €12,000. If that feels far away, start with €1,000 or one month of costs and build from there.

Step 1: work out your monthly essentials

Use what you actually pay, not what you'd like to pay. Your bank statements from the last two or three months are the quickest source.

• Rent or mortgage payment
• Electricity, heating, water and internet
• Groceries
• Transport: travel pass, fuel, car insurance
• Other insurance
• Phone
• Minimum payments on loans and cards
• Childcare, if you have it

Leave out eating out, holidays, shopping and most subscriptions. In a real emergency those are the first things you'd pause.

Step 2: pick your number of months

Three months is the floor. Move towards six, or beyond, the more of these apply to you:

• Your household depends on one income.
• You're self-employed, on commission or on a fixed-term contract.
• You have children or someone else who depends on you.
• You own your home, so repairs are your problem.
• Jobs in your field take a long time to find.
• Your car is old and you need it for work.

Two people with steady jobs, no kids and a rented flat can usually be comfortable with three months. A freelancer with a mortgage and two children should be looking at six to nine.

A worked example

Anna rents a flat and works full-time. Her essentials are rent €950, utilities and internet €120, groceries €350, travel pass €60, insurance €40, phone €20 and a student loan payment of €160. That's €1,700 a month.

• Starter goal: €1,700 (one month)
• Three months: €5,100
• Six months: €10,200

She's on a permanent contract with no dependants, so she aims for four months, €6,800. Saving €250 a month gets her there in a little over two years, and sooner if she adds part of any bonus or tax refund.

Where to keep it

Three things matter: you can get to it quickly, its value doesn't drop, and it's not in the account you spend from every day.

• A separate savings account, ideally one that pays some interest and lets you withdraw within a day or two.
• Covered by deposit insurance. In the EU, bank deposits are protected up to €100,000 per person per bank.
• Not in shares or funds. Emergencies and market drops often arrive together. Selling investments after a 20% fall to pay for a repair is the situation an emergency fund is meant to prevent.

How to build it from zero

1. Set up an automatic transfer on payday. Even €50 a month adds up to €600 in a year, and it happens before you have a chance to spend it.
2. Add windfalls. Put half of any bonus, tax refund or gift money straight into the fund.
3. Redirect small savings. Cancelling a €13 subscription you don't use is €156 a year. Our guide to finding forgotten subscriptions shows where to look.
4. Raise the transfer after a pay rise by part of the increase, before you get used to the new amount.

What counts as an emergency

A useful test: is it urgent, necessary and unexpected? Losing your job, a broken boiler in winter, an urgent vet or dentist bill, or a car repair you need to get to work all qualify. A holiday, a sale, a new phone because the old one is slow, or Christmas presents don't. Christmas comes every year, so it belongs in a separate savings pot for planned costs.

After you use it

Using the fund is the point, so don't feel bad about it. Once the emergency is over, go back to your monthly transfer, and raise it for a few months if you can, until the balance is back where it was.

Emergency fund or debt first?

If you have expensive debt, like credit cards at 15–20% interest, do it in this order:

1. Save a starter fund of €1,000 or one month of essentials.
2. Pay off the high-interest debt as quickly as you can.
3. Build the rest of the emergency fund.

The starter fund stops a surprise bill from going straight back onto the card you're trying to clear.

If you're working out your overall position as well, start with how to calculate your net worth.

Do it in mooves

1. On Net worth, add your emergency savings account as an asset so you can watch it grow.
2. On Budget, add the monthly transfer as a line in Savings. The budget shows whether there's room for it.
3. Raise the amount whenever your income goes up, before the extra gets absorbed by everyday spending.

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