How do I set up an emergency fund?

The rundown

An emergency fund is money set aside in a separate bank account to cover unexpected expenses like medical emergencies, home or car repairs, or job loss.
High-interest savings accounts and offset accounts are great places to keep and grow your emergency fund, as they have low fees and are easy to access.
Depending on your financial situation, aim to keep three to six months’ worth of your living expenses in your emergency fund.

What is an emergency fund?

Before you start investing, it’s important to build a financial safety net. That’s where an emergency fund comes in. It’s your financial buffer - money set aside to cover unexpected expenses like medical emergencies, home or car repairs, or job loss. Without one, you might be forced to sell your investments at the wrong time, which could expose your portfolio to loss.

Why should I have an emergency fund?

Investing involves risk – markets fluctuate, and your invested cash isn't always accessible right away. An emergency fund could help you:

Avoid dipping into your investments during a market downturn
Keep your cash invested for the long-term
Reduce financial stress during unexpected life events

How much money should I keep in my emergency fund?

A general rule of thumb is to have three to six months’ worth of living expenses saved in your emergency fund, though this depends on your financial situation.

Three months: if you have a stable job and low expenses
Six months or more: if your income is irregular or if you have expenses like a mortgage or dependants

For example, if your monthly expenses are $3,000, aim to keep $9,000 to $18,000 in your emergency fund.

Where should I keep my emergency fund?

Your emergency fund should be:

Kept separate from your investments and everyday spending money
Easy to withdraw when needed
In an account type that is not exposed to market risk

Some account types include a high-interest savings account or an offset account (if you have a mortgage).

How do I create my emergency fund?

Set a target savings amount

Calculate your monthly expenses and multiply by 3 - 6 months.

Open a separate savings account

Open an account with no fees and easy access.

Automate your savings

Set up regular, automatic transfers from your main bank account to your emergency fund after each payday.

Start small and build up

Start by putting aside $50 a week and build up over time.

Top it up with windfalls

Boost your emergency fund with tax refunds, bonuses and gifts.

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