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.

Start small to build your savings

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.

Use MoneySmart’s savings goals calculator to help see how a little saved each week help you reach your savings target.

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 paid.

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.

If you have a home loan with an offset account, you can use this account as your emergency fund. That way, the money will be working to reduce your interest payments, but will 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. Download MoneySmart’s free TrackMySPEND app to help identify areas where you can save.

Avoid impulse buying

Every dollar you spend on an impulse purchase is another dollar you don’t have to build your savings. Check out our tips on how to reduce the urge to impulse buy.

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 emergency fund.

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. ASIC’s budget planner can help you 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 pool.

When to use your emergency fund

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 the problem.

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 fund

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 the high interest 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.



Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at


This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee take any responsibility for their action or any service they provide.