By Amanda di Medici
The car won’t start on a Monday morning. The washing machine gives up mid-cycle. A child needs the dentist this week, not next month. None of these in isolation spell homeless. But when there is nothing set aside, a $400 bill isn’t just a $400 bill. It becomes a pit of anxiety, a week of catastrophic thinking, a rent payment juggled, the grocery shop quietly cut in half for a fortnight.
If that sounds like you, you are in good company, and it says nothing about your character. The Australian Bureau of Stats found more than one in five Australian households couldn’t raise $2,000 within a week for something important last year, part of an upward trend. That is a picture of rising costs, not careless people.
Money without a job
Most savings have a job or a goal: a holiday, a car, Christmas (or in my case, a designer handbag). An emergency fund doesn’t have a job, because you can’t predict what it will be spent on. Its whole purpose is to be boring and available.
An emergency fund isn’t about being rich. It’s breathing room, and it’s the difference between a bad week and a bad year.
Boring is harder than it sounds. Money sitting there doing nothing looks like money going to waste, and the temptation to borrow from it for something lovely is real.
Two things help. Keep it in a separate high-interest savings account, because most pay the bonus interest only in months you don’t make a withdrawal, which is a handy bit of friction. And don’t link it to a debit or credit card. If getting at it takes a transfer and a day’s patience, you will only do it when you mean it.
Top tip: Decide in advance what counts as an emergency, because when money is tight, everything feels urgent. My test is three questions:
- Is it urgent?
- Is it unavoidable?
- Does it have to be paid now?
A fridge that has died is an emergency. A fridge you’d like to upgrade is not. (A dead washing machine sits somewhere in between. There is usually a laundromat or a friend/family member.)
How much is enough?
ASIC’s Moneysmart says to bank three months of expenses. I think that’s a bit light on, and would say to aim for six months as the ideal. Here’s why. An emergency fund isn’t only for the dead fridge. It’s also for income interruption: losing your job, getting sick, or an accident that keeps you off work for a while.
Before you start howling at how ridiculous that is, how utterly impossible, let me tell you it’s not.
I know six months of expenses sitting pretty sounds like a number from another planet, and hearing it can stop people starting at all. So don’t start there. Start with the first $1,000, because it covers most everyday emergencies: the tyre, the tooth, the insurance excess. It is also the point where people tell me they stop bracing every time the mail arrives.
Three to six months is where you’re heading, not where you begin. The longest journey starts with a single step, and all that jazz.
Start small
Moneysmart’s own example is to tuck $20 away each week, and boom, you’ve got over $1,000 in your emergency fund in a year. If $20 is beyond you this month, make it $10. You are building the habit, not the balance.
Start by finding something in the budget you can redirect: a cup of coffee, a lunch out. Then make it fun. Sell anything you don’t need, pick up a side hustle, and get the cash in the bank.
Set up an automatic transfer on payday, not at the end of the pay cycle, so the decision is made for you. Keep the money out of sight of your everyday account, or use your mortgage offset if you have one. And when a windfall arrives, such as a tax refund, put it straight in. That is the fastest way to a first buffer.
I have watched this work up close. For years I delivered Saver Plus, the ANZ and Brotherhood of St Laurence program where people on modest incomes save a small amount each month towards education costs, and have what they save matched at the end. Of past participants, 84 per cent are still saving, and 71 per cent of those who finished more than seven years ago still save regularly. Nobody got rich. They built a habit, and the habit stuck.
It’s not just about the money, it’s about your headspace too
The Australian Institute of Health and Welfare found that in 2023, Australians under financial stress were two and a half times more likely to report poor mental health than those who weren’t.
Money worries don’t stay at the bank. It follows you to bed. A few hundred dollars set aside is often sleep you get back.
So if your fund is empty today, don’t start with the six-month target. Start with the next $20.
Money mantras, for the fridge door:
- Small and consistent beats big and occasional.
- Boring money is good money.
- Start where you are, not where the calculator says you should be.
Yenom is building a free money app, and we would love your help to shape it. Tell us what you would want from it at yenommoney.com/tell-us, or sign up to try the beta at yenommoney.com/beta. No sales pitch, no catch, just practical tools built around what real people actually need.
Amanda di Medici is the founder of Yenom, an Orange-based financial-wellbeing business, and has spent more than twenty years in financial education and counselling.
