Emergency Fund Calculator — United Kingdom 2026-27
How large an emergency fund needs to be, what it earns sitting in a savings account, what it gives up by not being invested, and how long it takes to build at your current rate.
The target is monthly essential expenses times the months you want covered — essential meaning rent or mortgage, food, utilities, insurance and minimum debt repayments, not what you actually spend.
| Savings return (5%) | £600.00 |
|---|---|
| Opp. cost (3.0%) | £360.00 |
How the emergency fund works
The target is monthly essential expenses times the months you want covered — essential meaning rent or mortgage, food, utilities, insurance and minimum debt repayments, not what you actually spend. Three months is the usual floor and six is the usual answer; the honest input is how long it would take YOU to replace your income, which is why the risk setting suggests three months for secure salaried work, six for most people and nine for commission, contract or single-income households. The opportunity cost is the part people argue about: money held at a savings rate rather than invested gives up the difference every year, and at a 3-point gap on a 12,000 fund that is 360 a year for the ability to not sell anything in a bad month. That is the price of the insurance, and seeing it as a number is the point — it is usually smaller than the fear of the gap suggests and larger than people expect. Keep the fund somewhere it earns interest and can be reached the same day; a term deposit that locks the money is not an emergency fund, and neither is a credit card.
Formula: target = monthly essential expenses × months · opportunity cost = target × (investment return − savings rate) · months to build = remaining ÷ monthly contribution
Where these figures come from
Savings and interest figures on this page are drawn from The Bank of England (Bank Rate), HMRC (ISA and savings tax rules), the Financial Services Compensation Scheme (deposit protection), and the Financial Conduct Authority (consumer protection).
- Bank Rate (base rate) — Bank of England — The Interest Rate (Bank Rate).
- ISA annual allowance & rules — GOV.UK — Individual Savings Accounts (ISAs).
- Personal Savings Allowance — GOV.UK — Tax on savings interest.
- FSCS deposit protection (£120,000) — FSCS — Financial Services Compensation Scheme.
- Consumer money guidance — MoneyHelper — Savings.
Last checked: April 2026. Rates and thresholds are reviewed against the source of record each November, when annual adjustments for the following tax year are published.
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3-month fund, £4,000/month expenses £12,000 target · £360/year opp cost
Three months of £4,000 expenses = £12,000 emergency fund target. At 5% savings rate that earns £600/year. If invested at 8%, the same £12,000 would earn £960/year — an opportunity cost of £360/year to hold as cash. This is the price of financial security.
| Emergency fund target | £12,000 (3 months) |
|---|---|
| Savings return (5%) | £600/year |
| Investment return (8%) | £960/year |
| Annual opportunity cost | £360/year |
| Monthly opportunity cost | £30/month |
| Verdict | £30/month for peace of mind — worth it |
- Time to build at £1,000/month savings ~12 months
- Best easy-access (2026) Chase / Marcus ~4.7% variable
- If no emergency fund May sell investments at a loss
- High savings rate benefit Reduces opportunity cost significantly
- Review fund size annually Adjust if expenses change
6-month fund, £6,000/month expenses (single income) £36,000 target · £1,080/year opp cost
Six months of £6,000 expenses = £36,000 emergency fund. Recommended for single-income households or self-employed. Savings at 5% earns £1,800/year. Opportunity cost vs 8% investment: £1,080/year.
| Emergency fund target | £36,000 (6 months) |
|---|---|
| Savings return (5%) | £1,800/year |
| Investment return (8%) | £2,880/year |
| Annual opportunity cost | £1,080/year |
| Monthly opportunity cost | £90/month |
| Who needs 6 months | Single income, variable pay, self-employed |
- Self-employed: consider 9-12 months Income can stop suddenly
- Offset mortgage as emergency fund? Saves mortgage interest — effective 5%+ return
- Time to build at £1,500/month ~24 months
- Split strategy 3 months easy-access + 3 months offset
- Annual review Rebuild after any drawdown
Best UK savings rates 2026/27 4.25%-4.85% per year (conditions apply)
Easy-access savings accounts are the recommended home for emergency funds in the United Kingdom. Top rates in 2026 range from about 4.25% to 4.85% per year, with the best deals often requiring conditions such as a minimum monthly deposit, a linked current account, or limited withdrawals.
| Chase Saver (linked account) | 4.75% (variable, easy access) |
|---|---|
| Marcus by Goldman Sachs | 4.55% (includes 12-month bonus) |
| Santander Edge Saver | 6.00% (on balances up to £4,000) |
| Barclays Rainy Day Saver | 5.12% (on up to £5,000, Blue Rewards) |
| Chip / Monzo easy access | 4.60% (app-based, no conditions) |
| 1-year fixed-rate bond | ~4.30%-4.60% (illiquid) |
- Conditions often matter Always check monthly requirements
- Bonus rate traps Bonus expiry or missed deposit = base rate
- Emergency fund: no-condition account Pick easy access you can reach any day
- Tax on interest Personal Savings Allowance: £1,000 basic rate
- Comparison site MoneySavingExpert, Moneyfacts, Which?
Opportunity cost of holding cash — is it worth it? Yes — the insurance premium is small
The opportunity cost of an emergency fund is the difference between what the cash earns in a savings account versus what it would earn if invested. At 5% savings and 8% investment return, the cost is 3% per year. On £20,000, that is £600/year — the annual price of financial security.
| Opportunity cost rate | Investment return minus savings rate |
|---|---|
| At 8% invest / 5% savings | 3% or £600/year on £20,000 |
| Without emergency fund risk | Forced to sell investments at a loss |
| 2020 crash example | FTSE 100 fell ~34% in Feb-Mar 2020 |
| If forced to sell at -34% | £20,000 loss becomes £6,800 cost |
| Annual opp cost vs crash loss | £600/year vs potential £6,800 loss |
- Reduce cost with offset mortgage Emergency fund reduces mortgage interest
- Higher savings rate narrows it At 4.5%, the gap drops to ~3.5%/year
- Self-insure calculation Cost per yr vs probability of needing it
- Liquid investments (ETFs) Some use ETFs as emergency fund — risky
- Best strategy Full emergency fund, then invest surplus
Worked examples
| Inputs | Fund Target | Note |
|---|---|---|
| 4,000 a month of essentials, three months covered | £12,000 | a 12,000 target earning 600 a year |
| Six months instead of three | £24,000 | the usual answer for most people — and double the opportunity cost |
| Half built, saving 500 a month | £12,000 | twelve months to finish it |
The sources behind this calculator
- CFA Institute — Quantitative Methods: The Time Value of Money — the discounting, annuity and IRR conventions used here
- US Federal Reserve — Regulation Z (Truth in Lending), APR calculation — why APR includes fees where a nominal rate does not
- MoneyHelper (UK Government-backed) — the UK's free money guidance service
Last checked: September 2026. These are the standard textbook formulas; the conventions named are those of the CFA Institute curriculum and ISO 80000 usage.