How to start an emergency savings fund?


It’s been a tough 12 weeks where my family have been hit by strings of mishaps which wish we could avoid. However I am glad all the issues and challenges faced could be resolved financially. With a family emergency fund I could take the stress factor out and resolve the immediate problem and move on.

It started with the car accident in December 2017 in the icy snow condition where I lost control and slam my car into the wall. I am glad I have insurance but still cost me £400 on excess fees payment. Just after the New Years, my seven year old MacBook Pro decide to die on me. A direct replacement cost me £2500. To make matters worse the Car suspension spring decide to fail after the car got repaired which cost me another £600 (not accident related). On the final week of January 2018, my accountant said I need to prepare £5,000 for my family personal tax payment which the government changed and enforced. The start of February 2018 I have to spent £380 on my teeth at the dentist cause there was a micro crack on my molar causing me great pain.

Early Preparation

All these were unexpected spending on top of all the other payments I have to complete. I spent a total of £9,000 before February 2018 ended, it was a bad start to the year. I am very glad I had started an Emergency Savings funds back 18 months ago to cope with situations like this. For the next few months I need to focus on topping it up again.


Five steps on Emergency Saving Funds

Let me share my five steps on how to built this emergency savings.

1. Fixed Direct Debit Savings

This is a key important step. I have done this for many years to force myself to save. I get between 3-6% on the savings depending on the varying interest rates. The maximum you can allocate is between $250-350 monthly direct debit. Only main issue is that the money not allowed for withdrawal after 12 months.

The amount (incl. interest) can be transferred to a savings account after a year.

2. Floating Savings

Well this is my variable savings. The amount can range from $100-$700 or more. With a more frugal attitude I can save more for my emergency savings which can vary from month to month. For the month of December till February are generally the worse months to save. May till July are always good months to save more due to five week months and overtime work.

I have to live a frugal life with minimal expenses to be able to start saving. Make sure you read our top blog How to cut monthly expenses to gain habits on how to maximise savings. This way I can select my luxuries rather than blindly spend on things which is unnecessary.

3. Gumtree Gumtree Gumtree!!

Every household has items or junk which members no longer use and just being stored in the attic or garage. If we spent a few hours every month going through the items I am sure we can find items which still store some value which we could sell.

Apps on our phone such as gumtree, eBay and Facebook marketplace are fantastic website to advertise our items for sale. My favourite is gumtree as it is free and non-postage required as buyers are cow ted to collect.

Work flow for posting items are less than two minutes per item now. Take a picture, select category, state description and press publish! In one hour I can easily publish about 10 items for sale. After two weeks about 4-6will sell immediately. The remaining will be put on eBay after two weeks. If no luck they I would donate to charity.

All the money from the sale goes into my floating savings in point #2 above.

4. Cashback Funds

There are plenty of mandatory purchase int he household on a monthly and yearly basis. Home and Car Insurance, internet, utility bills are several few mandatory bills which can earn cash back via information on this blog.

Online shopping and family holiday travels can help earn a significant amount of cash back as well via the same blog above.

My family and I saved over $1,500 in 2017 using cashback from the website. The money goes straight into our emergency family saving funds.


5. Fill up the Pot

Every family and person have different circumstances. Mostly these can be categorised by age group in general.

  • Under 30 years old and single – Min 3-6 months savings based on monthly expenses
  • 30-35 years old – min 6-12 months savings based on monthly expenses
  • 35-45 years old 12-24 months savings based on monthly expenses

The above basis is taken on scenario if you lose your job. At 30, if you lose your primary job, you should have 3-6 months to cover for all the major expenses such as rent, utilities, groceries etc. Any unnecessary work for me expenses like gym, car loan, subscriptions can be cancelled immediately. This way the emergency savings volume flow can be restricted.

This savings needs to grow and double when you reach your mid 30s, simply because that’s the age you are most likely to have more members in the family and the outgoing expenses are expected to grow exponentially.

Final words

Emergency Savings Funds must be the on the pillar of fundamentals approach which every family should adopt. Everyday I see family friends, neighbours and cousins happily splashing away on new car, garden, holidays, hobby equipment on their credit and store cards. When surprise situations springs in front they become extremely stressed out and instantly in financial debt.

Emergency savings funds are not just only for life or death situations but also helps to ease and pay for important spending which the family budget does not anticipate.


Dr Alex Koh
Founder and CEO of
Family Finance Made Simple

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