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How To Create An Emergency Fund In One Year

Updated: Nov 11, 2021

The statistics on savings in the UK are pretty frightening. A third of Brits have less than £600 saved, and 41% of the population don't have enough savings to live on for one month.

This is living life on a knife edge, it would only take a "restructuring" at your job to push you over it and send you into financial despair.

This is why it is crucial for everyone to have an emergency fund. Here's how to create one in just a year!

How Much Should I Have In An Emergency Fund?

Good question.

The conservative estimate would be six months of your current earnings, this gives you a very cosy safety buffer if the worst was to happen and you had no money coming in.

For those who believe they are in an ultra-safe job or could find a new one very quickly, three months would be the bare minimum. Everyone should have this for some kind of financial robustness.

Now this is all well and good me telling you this, but just how do you go about saving up this money from scratch?

Here's A Great Way To Do It

Saving six months of your salary in one year is pretty much impossible, unless you live with your parents still and pay no rent. So we'll focus on the minimum emergency fund of 3x your current monthly salary.

Lets say you earn £1500 a month, so for the minimum emergency fund you'd need three times that, which is £4500.

This sounds like a huge task already but it is possible, it will just take commitment and discipline!

To be able to save £4500 in a year, you'd need to save £375 a month.

This would be 25% of your salary.

Here's a few ways you can do it...

Focus On Your Three Biggest "Non-Essential" Expenses

By non-essential expenses I mean things like takeaways, eating out, subscriptions etc. This is where most wasteful spending occurs.

If you've got a gym membership and don't go to the gym, then cancel it.

Buy ready meals at the supermarket, instead of having a takeaway.

Instead of eating out, cook something up for yourself.

My golden rule is if you haven't used a subscription in 3 months, then get rid of it. You will be amazed at how much you can save if you reduced the spending of your non-essentials!

One less takeaway a month saves you £144 per year

Cancelling a gym membership saves you £480 per year

One less three course meal a month saves you £251 per year

That's £875 already, with only very small changes.

Your biggest expenses might not be any of these, but the same principle applies. The more aggressively you cut back, the more you will be able to save and that emergency fund will build very quickly over time.

Pick Up A Side Hustle

At the end of the day, you can only cut back on so much. So you need another way to generate money to put into savings, so the only other method is to increase your income!

Picking up a side hustle in some of your spare time is a great way to build an emergency fund. There's loads of side hustles you can do sitting on your sofa...

Affiliate Marketing: Where you recommend products, services or courses to other people through social media or your own website

Matched Betting: A tax free way of making income through the special offers and promotions distributed by bookmakers

Answering surveys online (such as with Swagbucks)

Becoming a Product Tester

It will take time to learn and set-up the first two, but they can be very lucrative side hustles...and some people even make full time careers out of them!

Automate Your Savings

This one's great if you struggle to stay disciplined throughout the month.

If you set up a standing order that automatically transfers money into your savings account when you get paid, then you don't actually have to think about it!

It's really simple to do this now with online banking, and the less work you have to put into building an emergency fund, the easier you will find it.

Having An Emergency Fund Is Critical For Financial Stability

Implementing these steps above will make it far easier for you to start an emergency fund from scratch. Whether it takes you a year or a few more, it is worth having that financial security.

It may seem like an arduous task but with a bit of commitment, discipline and automation, you'll be able to create an emergency fund that will keep you protected from the "rainy days".

If you found this article helpful, please consider buying me a coffee on Ko-Fi. All coffees will be reinvested back into the website and not...I'm genuinely running out of coffee jokes. I don't even drink it (:


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