More than 16 million people in the UK have less than £100 in savings. 27% of the population have no savings at all. That means no emergency fund. It’s one of the reasons why we have high household debt as a nation. It’s a cause of stress, anxiety and poor mental wellbeing for many.

Whilst it sounds depressing and it is true that the unexpected will happen, we can only focus on the thing we can control. How do we prepare for the unexpected financially?

What we are discussing here is building an emergency fund you can fall back on when the unexpected arises. The question is how much do you need? what steps do you need to take? and where do you put it?

There isn’t a scientific or definitive answer. An emergency fund can be different depending on circumstances from person to person, so it really depends on your personal circumstances. For instance, how much would you feel comfortable with as an emergency fund?

When I worked with clients as a Financial Adviser, we always aimed for a minimum of six months of expenses as a rule. Your expenses are everything you would class as an essential expenditure. This will include your mortgage, rent or car payments, for instance. Six months is generally viewed a sufficient time to find alternative employment in the case of redundancy and should be enough time to recover from most medical layoffs.

For many, six months expenses will appear a number too big. It can be a daunting prospect to face for many people. However, whilst it’s important to acknowledge the required number, it’s more important to view it with a positive mentality and the ability to look at it pragmatically.

So how to do you build an emergency fund?

You can watch my video on this HERE or alternatively listen to this episode of the podcast HERE.

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