GuidesEmergency fund
The first buffer between a bad month and a bad year
How Much Should a Family Emergency Fund Be?
An emergency fund is money set aside for expenses you cannot plan for: a lost job, a medical bill, a car that dies the week before a trip. The most commonly cited guideline is three to six months of essential household expenses — enough to keep the household running while income resumes or alternatives are arranged.
Three months is a floor, not a target. Households with a single income, variable earnings, or dependents often aim closer to six. The right number is specific to your household — the sections below walk through how to compute it.
Computing your number
Start with monthly essential expenses: housing, utilities, food, transport, insurance premiums, minimum debt payments — the bills that do not stop when income does. Multiply by three for the floor and six for the fuller cushion.
A household spending £3,000 a month on essentials has a floor of £9,000 and a fuller target of £18,000. The gap between what you have and that number is the shortfall worth knowing about.
- Use essential expenses, not take-home pay — lifestyle spending pauses in an emergency, rent does not.
- Adjust for income risk: single-income and self-employed households lean toward six months.
- Adjust for dependents: more people relying on the fund means a larger target.
Too little, and too much
Below three months, the fund may not survive a typical job-search window — this is the shortfall most guidelines focus on.
Above about twelve months, the question flips: savings far beyond the cushion earn little interest, and if the household carries high-interest debt, some households review whether part of that excess could reduce interest costs instead. At typical high-interest rates of 15-25% APR, a large balance can cost more per year than the extra savings earn.
How Keel checks this
Keel compares your listed emergency savings against your monthly expenses and flags a fund below three months or above twelve alongside high-interest debt — the same arithmetic on this page, run against your actual numbers rather than a worksheet you fill in once.
Common questions
Is three months of expenses enough?
Three months is widely treated as a minimum. Households with one income, variable earnings, or several dependents often target six months or more. A financial professional can help size the target for your situation.
Where should emergency savings be kept?
Somewhere accessible and low-risk — the fund needs to be there the day it is needed, not after a market recovery or a notice period. Comparing accounts from multiple providers on access and interest rate is a common approach.
Should I build the fund or pay off high-interest debt first?
Both matter; many households keep a small starter buffer while addressing high-interest debt, since the interest often outpaces savings returns. A financial advisor or credit counselor can help weigh the order for your numbers.
Does the fund count retirement savings?
No — the emergency fund is separate from retirement and education savings. Those are long-horizon goals; the fund exists to absorb short-term shocks without touching them.
Put your family on the chart — free to start, no credit card — and see which of these areas look light for your household.
Start freeThis guide is general information, not financial advice. Product and provider choices are individual — a licensed professional can evaluate your household's situation.