Building an emergency fund
Saving for a rainy day
An emergency fund (also known as a rainy day fund or savings
buffer) gives you some breathing space to deal with life's ups and
downs. You can use this money if something unexpected happens to
you or your family, like your car needs major repairs, or you need
to buy a new washing machine.
Here we show you how to build an emergency fund to protect
yourself if things go wrong.
What is an emergency fund?
An emergency fund is an amount of money you have set aside to
help cover the cost of any urgent and unexpected expenses. Having a
savings buffer means you won't need to borrow money if a crisis
happens and you need money quickly. It can give you peace of mind
that you can face any bumps in the road.
Video: Building an emergency savings fund
Video about building an emergency fund
Financial counsellor, Kristen Hartnett from The Salvation Army
Moneycare explains how you can build an emergency fund to help you
cope with unexpected expenses when things go wrong.
Start small to build your
The secret to building a savings buffer is to start small and
save regularly. It doesn't matter how much - or how little - you
save, you just need to make a start, and then keep going.
For example, if you save as little as $10 or $20 per week,
you'll have $520 or even $1,040 by the end of the year. That's the
start of a solid amount of savings that will give you some
financial breathing space.
See how saving a little each week can help you reach your
Savings goals calculator
Automate your savings
Saving regularly is the best way to build up your savings
balance. Set up a separate high interest savings account for your
savings to go into via automated payments set up with your bank.
You can also ask your payroll department if they can send part of
your pay to your savings account.
Then you can set and forget, knowing that your savings are
growing without you having to transfer them every time you get
If you find a savings account that offers bonus interest for
every month you don't make a withdrawal, you'll be less likely to
touch the money unless it's an emergency.
Savings round up
Some banks now offer an option to round up purchases you make
using a contactless card and transfer this
amount to your
savings account. You can set the round up amount to the nearest
$1 or $5.
For example, if you set your round up amount to the nearest
dollar and you buy a coffee for $4.50, your account will be debited
with $5 and the 50c change will be added to your savings
Maximise your offset account
If you have a home loan with an offset account,
you could use this account as your emergency fund. That way, your
money will be working to reduce your interest payments, but will
also be available to use if you need it.
Ways to save every day
Track your expenses
It's easy to lose track of the money you spend everyday. By
getting into the habit of recording what you are spending your
money on, you'll be able to identify areas where you can
Track your personal expenses on the go with our free and
Avoid impulse buying
Every dollar you spend on an impulse purchase is another dollar
you don't have to build your savings.
Save spare change
Who said piggy banks are just for kids? Get an empty jar or ice
cream container and put your spare change into it at the end of
each week. When the container is full, deposit the money into your
Do a budget
A budget can help you get a better picture of your finances,
allowing you to plug any spending leaks you might find.
Work out what your household expenses are.
Keep adding to your savings
If you happen to get any extra money during the year, for
example from a tax refund, you can add this money to your savings
When to use your emergency
Receiving an unexpectedly large or urgent expense is never a
good feeling, but having a savings buffer will help to keep your
stress levels down. You won't have to worry about where you'll get
the money to pay for it, and you can focus your energy on solving
If you need to dip into your emergency fund, remember to
top it up again afterwards.
Keep your emergency fund for those expenses you really need to
pay now. If you want to use your savings for something else, then
set up a separate savings goal.
Case study: Briony uses her rainy day
Briony had been building an emergency fund for 2
years and had saved more than $1,000. To build up her savings, she
had set up automatic transfers on payday from her bank account
straight into a high interest savings account.
When her car suddenly broke down, she used some of the money
from her savings account to pay for it to be fixed.
Briony was relieved to know she didn't have to put the car
repairs on credit or ask her family for money. Also, because she
has set up automatic transfers, she could top up her emergency fund
again from her next pay.
An emergency fund gives you control over your
finances in a time of crisis. By regularly saving for a rainy day,
you'll be able to weather life's storms.
Last updated: 18 Dec 2018