Sam Walker
A rainy day fund provides a crucial fallback if you lose your job, need to cover a medical bill or urgent car repairs, but new research reveals one in five Brits has less than £1,000 stashed away for emergencies.
How much should you hold in an emergency savings pot though? Should your emergency fund be separate to money held for other savings goals? And which are the best savings accounts to keep your emergency fund in?
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Those in later life need more, as they generally have lower earnings – retirees need a pot big enough to cover one to three years’ worth of essential spending.
Sarah Coles, head of personal finance at investment platform Hargreaves Lansdown, says: “If there are a number of people relying on your income and you have had health problems in the past or your income is variable, you’ll probably feel more comfortable holding more.
How much should I have in emergency savings?
The average weekly household spend for the financial year ending 2024 was around £623, according to the Office for National Statistics (ONS), equating to £2,492 a month.
Based on these figures, savers should aim to have the following amounts in their emergency pots:
Period of essentials to cover | Amount of savings you need |
Three months | £7,476 |
Six months | £14,952 |
One year | £29,904 |
Three years | £89,712 |
However, new data from investment platform AJ Bell suggests plenty of Brits are nowhere near these figures.
Polling by the firm of 4,000 adults found one in five (19%) have less than £1,000 saved in an emergency cash pot.
Younger people are worse at having a rainy day fund than older people – 21% of over-55s have £20,000 or more nestled away, while 37% of 18 to 34-year-olds have less than £2,000 in emergency savings.
Laura Suter, director of personal finance at AJ Bell, says: “The most important thing people can do is start saving as early as possible, even if it’s just a small amount of money.”
Separate figures from the Financial Conduct Authority (FCA) paint a bleaker picture.
The City regulator’s most recent Financial Lives survey revealed one in 10 people have no cash savings at all, while another 21% have less than £1,000 to draw on.
One in four people in the UK are classed as having ‘low financial resilience’, meaning they’ve missed payments, are struggling to keep up with payments or have no savings.
Oliver Morley, chief executive at the Money and Pensions Service, says people improving their finances is crucial to bettering other aspects of their lives.
“People who experience individual financial wellbeing are less stressed about money which in turn has positive effects on their health, relationships, and work,” says Morley.
How to calculate your specific requirements
The above figures are just a ballpark guide. Your specific requirements will vary depending on your lifestyle. To arrive at a more customised figure, look at your bank statements and work out how much you spend on essentials in the average month. This could include:
- Housing costs (mortgage payments, rental costs, home insurance, service charge)
- Council tax
- Energy bill
- Water bill
- Internet bill
- Phone bill
- Car insurance
- Food costs
- Transport costs (petrol, train tickets)
If you have people who are financially dependent on you, you should factor their costs in too. Again, your requirements will vary considerably depending on your lifestyle. For example, those with children in private school may wish to consider what a shock redundancy could mean for their child’s education. If you want your emergency pot to cover something like school fees, it will need to be considerably bigger.
When to use an emergency fund
An emergency fund is just that – for emergencies. However tempting it might be to dip into it to fund a holiday or a new purchase, it is a bad idea. The pot should be kept for shock life events like redundancies, car breakdowns or unexpected home repairs that need immediate attention.
If you are making a big purchase like buying a house, don’t be tempted to use your emergency pot to boost your deposit. Often, big life events like this come with unexpected costs – for example a boiler that suddenly needs replacing. As such, it can actually be a sensible time to boost your emergency savings, even if that means waiting slightly longer to achieve your long-term goal of getting on the property ladder.
Where to put your emergency savings
There are two main things to consider when choosing an account for emergency savings - their rate of interest, and how quickly you can get hold of your money.
Easy-access savings accounts are generally best-suited – just make sure there are no withdrawal restrictions so you can take out cash at any time.
You’ll next want to choose the right type of easy-access savings account. Make sure you opt for one that is protected by the Financial Services Compensation Scheme (FSCS).
Funds held in an account protected by the scheme are eligible for compensation of up to £120,000 if a financial firm like a bank fails.
When choosing an account, it could make sense to opt for a normal savings account rather than an easy-access cash ISA. This means you won’t erode your annual ISA allowance by putting money into the tax-free account that you later need to access (although a flexible ISA could help you get around this). That way, you can preserve your ISA allowance for other savings goals, provided you are able to contribute to other pots at the same time as your emergency fund.
Just bear in mind, the cash ISA annual allowance is set to be reduced from £20,000 to £12,000 from April 2027.
These are the top easy-access savings accounts on the market at the moment, according to Moneyfacts (all FSCS-protected):
Account | Rate (AER) | Notes |
Sidekick Multi Shield | 4.48% | Interest paid monthly, with the 4.48% variable rate including a 1% bonus for six months on the first £120,000 saved. Comes with unlimited penalty-free withdrawals. |
Cahoot Simple Saver | 4.40% | Interest paid yearly on balances up to £500,000. After 12 months, funds are transferred to a Cahoot Savings Account. |
Chip Easy Access | 4.37% | Interest paid monthly, with the interest rate falling 2.74% after 12 months. Maximum of three penalty-free withdrawals. |
Shawbrook Bank Easy Access Savings Account | 4.34% | Account includes a 2.34% fixed bonus for the first 12 months with a minimum saving of £1. Comes with unlimited withdrawals and deposits. |
Mansfield Triple Access Bonus Saver | 4.25% | Customers can access funds a maximum of three times per year. Account includes a bonus interest rate of 1% for the first year, then reverts to 3.25%. |
Accurate as of 11 December 2025
Top tips for getting your finances in order
AJ Bell’s Suter suggested three tips for getting your finances in order.
Pay more into your workplace pension
Under auto-enrolment, at least 8% of your salary must go into a workplace pension scheme – 5% from your wages and 3% on top from your employer.
However, this is just a minimum and employers often pay more in if you’re happy to increase your contribution.
Suter says: “This is effectively free money to give your pension a boost. These small additions now can really add up when you come to retirement.”
The self-employed are excluded from auto-enrolment, but can still use a self-invested personal pension (SIPP) or a LISA to save for retirement and get top ups from the government in the form of tax relief and bonuses.
Consolidate pensions
Those who have had multiple jobs in their working lives could benefit from consolidating their pension pots.
Not only does it make managing your pension logistically easier, it can reduce the amount you’re paying in fees to providers.
Suter says: “Combining these into a single pot makes sense from a time management perspective and you might also be able to save on costs. Having a single pot means you can have a clear focus on what you’ve got and how you’re going to hit your goals.”
Don't hoard cash that could be invested
Some people do have enough stashed away in emergency savings, but could be putting excess amounts to better use.
If you have large amounts in cash savings, it might be worth investing it so it grows more over time.
“Hoarding cash that could be generating better returns via investing isn’t a great way to put your hard-earned money to work. A lot of people have time on their side to take higher risks with their money and history suggests that investing in shares can generate a higher return than cash over time,” Suter says.
It’s worth bearing in mind, by investing your savings, your capital is at risk and returns aren’t guaranteed.
