UK finance jargon - in plain English
Cash savings kept aside for unexpected costs or job loss.
An emergency fund is money set aside specifically for unplanned financial shocks like a broken boiler, car repair, or job loss. Many people aim for three to six months of essential living expenses in an easy-access account.
Your essential monthly outgoings are £1,800. A three-month emergency fund means saving £5,400 somewhere separate before focusing on other goals. When something goes wrong, you fix it without going into debt.
Numbers simplified for illustration. Actual rates and tax rules may change.
People dip into their emergency fund for non-emergencies like holidays or a new phone. Keep it in a separate account with a boring name so it stays off limits.