Why You Might Need An Emergency Fund, And How Much Should Be In It

By Emma Edwards
7th Oct 2020

Welcome to the Financial Wellbeing Bootcamp brought to you by ANZ. To sign up and be in the running to win $1,000 towards your savings, click here.

If any year was going to be the face of an emergency fund, it’s got to be 2020. It’s just one disaster after the next. If this year has got you hungry for a little more financial stability, you’re in the right place. We’re bringing you a six-week bootcamp to help you build financial stability and improve your financial wellbeing.

Our Financial Wellbeing Bootcamp, brought to you by ANZ, is inspired by their four-step financial wellbeing check-in, and loaded with helpful tips and insights to help you get a firm handle on your finances.


If you’ve just joined us, make sure to check out all of our previous curriculum here to help you on the road to financial wellbeing. This week we’re talking all about emergency funds, how you could build one and how much you might have in yours.

What Is An Emergency Fund?

Also referred to as a ‘rainy day’ fund, ‘buffer’ fund, or other term coined to mean a surplus of money for unexpected situations, your emergency fund does exactly what it says on the tin. Having an emergency fund means having savings ready for any kind of financial emergency, whether that’s losing your job, an unexpected car breakdown, or replacing your phone after you dropped it down the toilet.

If 2020 has taught us anything, it’s that we never know what’s around the corner. Just a few months ago we were merrily going about our daily lives, planning travel, and feeling untouchable. It’s during these good times that building an emergency fund is easiest. Save while you’re in a good place, so you’ve got support there if you run into a bad place.

How Do I Build One?

If you’re getting started with savings, an emergency fund may be your first port of call ahead of all other goals. Having that cash stashed away can give you the confidence you need to achieve other savings goals you have, as you’re not plagued with money worries in the same way as when you’re running on zero.

ANZ Research has shown that $1,000 was associated with higher financial wellbeing, compared to having absolutely nothing for a rainy day. From here, you could automate your savings as a percentage of each paycheck to top it up until you’re at your desired amount.

How Much Do I Need In My Emergency Fund?

It’s that age-old question: how long is a piece of string? Working out how much you need in your emergency fund can be complex, as we ultimately never really know what’s going to happen.

We suggest looking at your lifestyle and reverse engineering your emergency fund goal from there.

So, if you’re a student living with your parents, but you’ve got a car and a laptop that you need for Uni, you might focus on saving enough for a new computer and $1,000 - $3,000 for potential car repairs, depending on how old your car is.

However, if you have a mortgage, a pet dog and you work in a fairly active job where being on your feet is essential, your emergency fund could look very different. You could consider saving a few months’ worth of mortgage repayments, enough for potential vet bills, and enough for a few months of general living expenses in case you became sick or injured and unable to work for a while. In these instances, backing up your emergency fund with insurances like income protection, total permanent disability (TDP), and even pet insurance can give you extra peace of mind.

Remember to do what is right for you and your financial circumstances, needs, and objectives.

Building the security you need could help you stop worrying about money and could make a difference to your financial wellbeing. Not sure where and how to start? Head here to discover how you can save $10K for a rainy day and stash cash on autopilot.

Want to keep the savings momentum going? Head here to stay up to date with ANZ’s Financial Wellbeing initiatives and stay on track.

Image credit: Jordge Saavedra

Editor’s note: This article has been written and published by Urban List, and is sponsored by ANZ. Unless otherwise stated, all views and opinions belong to Urban List. Thank you for supporting the sponsors who make Urban List possible. Click here for more information on our editorial policy.

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