Could you cope if you needed instant access to money during an emergency? Learn simple ways to create savings for times when life throws you a curve ball.


Many expenses and changes in life can be planned, like buying a house, going on holiday, picking up groceries or having a baby. But there can be plenty of unforeseen changes as well, including job losses, shock bills, broken-down cars and illness. The good news is that you don’t have to get into debt if unplanned situations arise.

Follow these simple actions to create an emergency fund for that rainy day, and take another step towards financial peace of mind.

Assess your total income

Before calculating how much you can afford to put into your emergency fund, you’ll need to evaluate just how much money you have now, plus what’s coming in. This might be straightforward if you have a regular pay cheque, but if your income is sporadic or ad-hoc, it might need a bit more working out. Don’t forget to include any expected income from shares or interest from existing savings accounts. And, while you’re thinking about making money, consider other immediate revenue streams – like selling unwanted stuff you have lying around the house.

Work out what you spend

Just where does your money go every month? Think about all the bills you pay (rent or home loan, mobile phone, internet, utilities, insurance etc), any memberships you have, transport costs , how much you spend on groceries and personal care. Many of these expenses are essential, but you may have some non-essential expenses as well: eating out, entertainment, buying unnecessary clothes, having three takeaway coffees a day… You can keep track of your expenses using tools like the AMP Budget Planner Calculator, it makes this process much easier and helps you re-evaluate your savings goals down the track.

Set a goal for your emergency fund

How much money do you want to have in your emergency fund, and how soon do you want it? Figures quoted by experts can vary widely, with some suggesting you should have enough to cover three to six months of your expenses, whereas others recommend at least a year of your income. What all agree on is getting started – having something in your emergency fund, even a few hundred dollars, is better than nothing. So, set a goal that’s achievable and realistic, and not so daunting that it’ll prevent you from even getting started.

Plan how you’ll do it

Once you know how much you want to save, you need to work out how to get there. Saving for your emergency fund should take into account your income and savings goals, and then look at all the ways you can cut back on your expenses. This is where you need to be ruthless, slashing unnecessary spending , ie your wants, as opposed to your needs.

Let’s say you want to save $2,000 in six months: that’s about $330 a month, or around $11 a day. Go through your spreadsheet of expenses and look at all the areas that can be tightened or eliminated completely to make this goal achievable. You’ll find most are the non-essential expenses listed above, but you can also save money by talking to suppliers, like your electricity, water and gas suppliers and mobile phone provider to negotiate better plans.

Get cracking

Your emergency fund is just that – a safety net. It’s not a chunk of money for planned everyday expenses or a holiday you want to take (that’s what your savings account is for), so you shouldn’t touch it until you need it.

To help avoid temptation of dipping into it, you could create a specific account for your emergency fund. Choosing an account with high interest can mean you’ll be financially rewarded for contributing to it. And opt-out of having a linked debit card, to remove easy access temptations. Set up an automatic transfer of cash from your primary account on a set day every month (like the day you get paid) and then just forget about it. This way, you don’t even have to think about your emergency fund, but it will be accessible when you truly need it.

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