An emergency fund is an account where you can put some funds aside to help you pay for unexpected expenses – like a broken washing machine or major car repairs. It can help give you some breathing space to deal with life’s changes, without digging into your savings or having to rely on a credit card.
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How to build an emergency fund
How much money should you save
This is going to be different for everyone. Things like having kids or pets, owning a car or relying on contract work could increase the amount of unexpected costs you might want to be prepared for.
A good rule of thumb is to aim for a few months of your total living expenses – so you can make sure you’re able to cover most costs that come your way. Most people don’t just have that lying around, but if you create a monthly budget, you can slowly start putting it away.
Create a savings habit
You don’t need to make huge changes to your life and budget – just start small, then keep going. If you start putting aside $10 per week, you’ll have $520 by the end of the year, which is a great place to start.
If you want to track your progress, you can create a savings goal in our Bankwest App. We’ll even show you when you’re due for a top up.
Where to put your funds
You’ll probably want to keep this separate from your everyday accounts – this way, you’re not tempted to dip into it unnecessarily. Keep an eye out for high interest savings accounts that suit your savings habits, so you can get the most bang for your buck.
Make the most of your offset account
If you have a home loan and an offset account, you could keep your emergency savings there, so your funds are also working to reduce the interest you’ll pay on your loan. Keep in mind that you won’t earn interest on your savings, so your fund could take longer to build up.
See how to make the most of your offset account
Replace what you use
If you do need to use your emergency fund, try to top it up again once you can. This way, you can stay prepared for life’s ups and downs.
The information contained in this article is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this article without first obtaining specific professional advice. Also to the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL / Australian credit licence 234945, its related bodies corporate, employees and contractors accept no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this article.