Why should I keep an emergency fund?

An emergency fund is money set aside only for surprises: a medical bill, a job loss, a broken motorbike. Without one, an emergency often means borrowing at high cost or selling investments at a bad time.

Most guides suggest building up enough to cover three to six months of essential spending. That sounds like a lot, so start small. Even one month's expenses makes a real difference, and you can add to it a little each payday.

Keep it somewhere safe and easy to reach, but not so easy that you dip into it for everyday spending. A separate savings account at a bank, or a money market fund that pays out within a day or two, both work. Do not keep your emergency fund in shares or crypto: their prices can fall just when you need the money.

When you use the fund, refill it before you go back to investing. It is the foundation that lets you take sensible risks with the rest of your money.