Why you need an emergency fund

No one wants to think about the worst happening. But if you-know-what hits the fan—what’s your financial plan?


Life can be unpredictable and sometimes it’s hard to know where it’ll take you. Which is why an emergency fund or ‘rainy day account’ can be a great thing to have so unexpected events don’t have to totally derail your life.

What’s the deal with emergency funds?

An Australian study by comparison website Finder showed unexpected bills financially trip up many Australians. The research found one in five Australians don’t have enough saved to cover even a $500 setback—that’s 3.6 million adults nationwide.

It showed:

  • Only 41% of the population had at least $5,000 to pay for unexpected costs, while 30% had less than $1,000 on hand to cover expenses.
  • Unexpected situations that people experienced included things like redundancy (24%), dental work (18%), illness not covered by Medicare (11%), burglary (11%), accidents requiring surgery (11%), booking emergency flights at short notice (10%), and a lost phone (8%).

So while some events like losing your job or getting injured seem obvious, there are some less obvious speed bumps a rainy day account would be handy for.

How much should I aim to have?

While a good rule of thumb is to have two to three months’ worth of expenses as a solid buffer, everyone has different needs. Make your goal smart and realistic and give yourself a timeframe to keep you on track—it’s not going to happen overnight.

Start small

The secret to building your own emergency fund is to start small and save regularly. It doesn't matter how much—or how little—you save, you just need to make a start, and then keep going.

Mapping out your expenses to see where your money currently goes can show you how much you can start putting away.

For example, if you start with just saving $10 or $20 per week, you'll have $520 or even $1,040 by the end of the year. That's a solid start to give you some financial breathing space.

There are even some online savings accounts that offer higher interest rates with regular savings deposits. It’s worth checking out what suits you.

Double the protection

If you have insurance through your super, it’s worth checking if you have income protection as well. Income protection is a type of life insurance that typically provides up to 85% of your income if you're unable to work due to illness or injury. It's often overlooked, because being out of work isn’t the cheeriest thing to think about. The insurance payments typically start after a waiting period and cover a portion of your income—not all of it.

Ensuring you have enough income protection and combining this with your emergency savings is a good way of setting yourself up in case you can’t work for a period of time. Log in to your account to check your cover.

Most eligible UniSuper members receive some default cover when they join—check your latest statement or log in to your account to check what you have. If you’re in the Defined Benefit Division (DBD), you don’t have access to income protection cover, but your membership may include inbuilt temporary incapacity benefits that provide similar protection.

Treat yourself

Putting away cash isn’t easy, which is why it’s important to celebrate your milestones. Cutting back too much has been linked to burnout and goal abandonment, so be sure to treat yourself. Think of it this way: it’s ok to spend a little to save a lot.

Building a rainy day account may seem challenging when you don’t feel you have much left over income, but once you get a bit of money saved up, you’ll be surprised by how good it feels to know you have that buffer when an emergency hits.