Why You Need an Emergency Fund
Life throws curveballs. Your boiler breaks, your car needs repairs, or you face unexpected redundancy. An emergency fund means you can handle these situations without:
- •Going into debt
- •Selling investments at the wrong time
- •Relying on credit cards with high interest
- •The stress of financial uncertainty
Key Point
The Traditional Advice: 3-6 Months
You've probably heard you should have 3-6 months of expenses saved. But this one-size-fits-all advice doesn't work for everyone.
Let's break down what actually matters.
A More Nuanced Approach
Factors That Increase Your Need
| Factor | Why It Matters |
|---|---|
| Variable income | Commission, freelance, or bonus-dependent earnings are unpredictable |
| Single income household | No backup if the primary earner loses their job |
| Older home or car | More likely to need expensive repairs |
| Less job security | Higher risk of redundancy |
| Dependents | More people relying on your income |
Factors That Reduce Your Need
Tip
- •Dual income household - One partner can cover expenses if the other loses work
- •Strong job security - Like Standard Life's stable employment
- •Other accessible savings - Investments you could liquidate if truly necessary
- •Fewer fixed expenses - Lower mortgage or rent payments
Calculating Your Number
Step 1: List Your Essential Monthly Expenses
These are the costs you'd need to cover in an emergency:
- •Mortgage/rent
- •Utilities (gas, electric, water, council tax)
- •Food
- •Transport (including car insurance, fuel)
- •Insurance premiums
- •Minimum debt payments
- •Essential childcare
Important
Step 2: Multiply by Your Factor
| Your Situation | Months Needed |
|---|---|
| Very secure, dual income | 3 months |
| Secure single income (Phoenix!) | 4-6 months |
| Variable/commission income | 6-9 months |
| Self-employed | 9-12 months |
Where to Keep It
The Best Options
- •
Easy access savings account - Look for top rates (currently around 4-5%)
- •
Cash ISA - Tax-free and accessible (especially good for higher rate taxpayers)
- •
Premium Bonds - Safe, tax-free prizes, instant access
Did you know?
Where NOT to Keep It
- •❌ Current account - Earns nothing and too tempting to spend
- •❌ Investments - Too volatile for emergency money
- •❌ Fixed-term accounts - Not accessible when you need it
- •❌ Under the mattress - Loses value to inflation (and theft risk!)
Building Your Fund
If you don't have an emergency fund yet, don't panic. Start small and build gradually:
- •Start with £1,000 as a "starter" emergency fund
- •Then build to one month of expenses
- •Then gradually work up to your target
Tip
The Standard Life Advantage
As a Standard Life employee with access to Altor, you can use our Emergency Fund Calculator in the app to find your ideal amount based on your specific circumstances.
Use our Emergency Fund Calculator in the app to find your ideal amount.
