Question 1

How much should I have in my emergency fund?

Accepted Answer

Most financial experts recommend 3 to 6 months of essential living expenses in your emergency fund. If you have a stable job with a regular income, 3 months may be sufficient. If your income is variable (e.g. freelance, casual, or commission-based), aim for 6 to 12 months. In Australia, the average household spends around $3,500 per month on essentials, meaning a typical emergency fund target is between $10,500 and $21,000.

Question 2

Where should I keep my emergency fund?

Accepted Answer

Keep your emergency fund in a high-interest savings account that allows instant access. Avoid term deposits or investments for your emergency fund, as you need to be able to access the money quickly. Many Australian banks offer bonus interest savings accounts with rates of 4.5–5.5% p.a., which is a good option. The key priorities are liquidity (instant access), safety (government-guaranteed deposits up to $250,000 per ADI), and earning some interest while it sits there.

Question 3

What expenses should an emergency fund cover?

Accepted Answer

Your emergency fund should cover essential living expenses only — the costs you absolutely must pay to keep a roof over your head and food on the table. This includes rent or mortgage repayments, groceries, utilities (electricity, gas, water, internet), transport, insurance premiums, and minimum debt repayments. It should not include discretionary spending like entertainment, dining out, or subscriptions that you could cancel in an emergency.

Emergency Fund Calculator

Related Tools