Saving money and building an emergency fund
How to set savings goals, build a safety buffer for life's surprises, and make saving happen automatically.
The short version
- An emergency fund is money set aside only for real surprises, like job loss or urgent repairs.
- Many people aim for three months of essential expenses, built up slowly.
- Automate your saving on payday so it happens before you can spend it.
- Keep savings separate from your everyday account to reduce temptation.
Saving gives you choices. Whether it’s a holiday, a car or just a cushion for tough times, having money set aside means you rely less on credit when life gets bumpy.
Why an emergency fund comes first
An emergency fund is money you keep for genuine surprises. Think of a car breakdown, a big vet bill, a broken fridge or a few weeks without work.
Without a buffer, these costs often go on a credit card or a loan. That can turn a one-off problem into months of repayments and interest.
A buffer also brings peace of mind. Knowing you can cover a $1,000 surprise makes daily life feel less stressful.
How much should you aim for?
There’s no single right number. A common goal is enough to cover three months of essential costs. Essentials are things like rent or mortgage, food, power, transport and insurance.
Some people aim higher, for example if:
- their income is irregular, such as casual or self-employed work
- they are the only earner in the household
- they have dependants
If three months feels too big, start smaller. A first goal of $500 or $1,000 is a great start. Then build from there.
Where to keep your savings
Your emergency fund needs to be safe and easy to reach, but not too easy. Some options people use:
| Option | Good for | Things to know |
|---|---|---|
| Savings account | Most emergency funds | Can access quickly; check bonus-rate conditions |
| Offset account | People with a home loan | Reduces loan interest; money stays available |
| Term deposit | Savings you won’t need for a set time | Locked away; less suitable for emergencies |
Money in Australian banks, credit unions and building societies is protected by the government’s Financial Claims Scheme, up to $250,000 per person, per banking licence (2026–27).
Make saving automatic
The easiest savings are the ones you don’t have to think about.
- Set up an automatic transfer to your savings account on payday.
- Start with an amount that doesn’t hurt, even $10 or $20. You can raise it later.
- When you get a pay rise or finish paying off a debt, add some of that money to your savings.
- Put unexpected money, like a tax refund or a gift, towards your goal.
Saving for other goals
Once you have a basic buffer, you might set other goals. Write each one down with a target amount and a date.
For example: “Holiday, $3,000, by December next year.” Divide the amount by the number of pays until then. That tells you how much to save each payday.
Separate accounts or “buckets” for each goal can help you see your progress.
Interest helps too. When you earn interest on your interest, your savings grow faster over time. This is called compound interest.
When to use your emergency fund
Ask yourself three questions before you dip in:
- Is it unexpected?
- Is it necessary?
- Is it urgent?
If the answer to all three is yes, that’s what the fund is for. Use it without guilt, then slowly top it back up.
Next steps
- Work out your essential costs for one month and set a first savings goal.
- Set up an automatic transfer on your next payday.
- If you are already struggling to cover essentials, call the free National Debt Helpline on 1800 007 007 or visit https://ndh.org.au
Work out your numbers
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Sources and further reading
General information only. This video doesn't take into account your objectives, financial situation or needs. Figures are for 2026–27 and can change. Check the official sources above.