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Lesson 2: Building Your Financial Safety Net - Cheat Sheet

Emergency Fund Size Guidelines

Situation
Recommended Fund Size
Single income, specialized career
6+ months of expenses
Single income, easily transferable skills
4-6 months of expenses
Dual income, no dependents
3-4 months of expenses
Self-employed/variable income
6-12 months of expenses
Stable government job
3 months of expenses

Emergency Fund Stages

  1. Mini Emergency Fund: ÂŁ1,000 (covers minor emergencies)
  2. Starter Emergency Fund: 1 month of expenses
  3. Full Emergency Fund: 3-6+ months of expenses (based on personal factors)

Where to Keep Your Emergency Fund

Account Type
Pros
Cons
Best For
Easy-access savings
Immediate access, FSCS protected
Lower interest rates
Core emergency fund
Cash ISA
Tax-free interest, FSCS protected
May have withdrawal restrictions
Portion beyond immediate needs
Premium Bonds
Potential for tax-free prizes, government-backed
No guaranteed return, 3-day withdrawal time
Portion beyond immediate needs
Current account
Instant access
No interest, temptation to spend
Not recommended

What Qualifies as an Emergency?

True Emergencies:

  • Job loss or significant income reduction
  • Medical emergencies not covered by insurance
  • Essential home or car repairs
  • Emergency travel (e.g., family illness)

Not Emergencies:

  • Planned expenses (even if you forgot to plan for them)
  • Discretionary purchases, even at a discount
  • Regular maintenance costs
  • Predictable annual expenses like Christmas

Quick Ways to Build Your Mini Emergency Fund

  • Sell unused items (electronics, clothing, furniture)
  • Temporary side gigs (delivery, freelancing, tutoring)
  • Reduce retirement contributions temporarily (except employer match)
  • Cut subscription services for 2-3 months
  • Tax refunds, bonuses, cash gifts
  • “No-spend” challenge for 30 days

Psychological Tricks to Protect Your Fund

  • Name your account specifically (“Emergency Fund—Touch Only If Bleeding or Redundant”)
  • Keep it at a different bank from main accounts
  • Remove debit card from wallet
  • Create a written decision tree for withdrawals
  • Implement a 72-hour rule for non-urgent withdrawals
  • Set up accountability with a trusted friend or partner

Rebuilding After Using Your Fund

  1. Assess what happened and whether it could have been prevented
  2. Temporarily redirect money from lower-priority financial goals
  3. Look for one-time ways to inject cash into your fund
  4. Return to your regular savings rate once the fund is replenished