Emergency funds: How much is enough in 2025?
It might sound like a luxury, but it's one of the best tools for surviving in a world where price rises are outpacing wage growth and jobs are less secure.
Even in 2025, with easy access to credit such as buy-now-pay-later and support from Work and Income and the community, having your own emergency fund still makes financial sense.
All sorts of curveballs can derail us. Think: accident, ill health, business failure, and relationship breakdown, to name a few.
The magic number of how much to save in an emergency fund is three to six months of living expenses. That might seem like a pipe dream for some. However, people who focus on the goal find a way to get there.
There's a common myth: 'I can't afford to save'.
In truth, it's the opposite; we can't afford not to.
Get started with a few powerful personal finance tricks.
The first is to track spending to free up money for savings. Set up small, achievable goals, such as the first $40 by the end of this month.
Automate savings at the beginning of the month. Where possible, look for additional income such as a small side hustle.
Get quick wins on the board. If you replace eggs on toast or leftovers instead of, say, $25 on takeaways, chuck the $15-plus into your emergency fund. Deleting UberEats can free up considerable cash.
Any amount, even $5 or $10 a week, is worth adding to the fund.
Start by saving just enough to cover one week of expenses. That alone gives you breathing room to pay a single unexpected bill or to help out whānau in a true emergency.
But remember, the fund is for emergencies, not for everyday spending. So keep the money in a separate savings account that isn't linked to your Eftpos or debit card.
If you're serious about building an emergency fund, beware of mistaking everyday spending for emergencies. That's confusing needs and wants.
An emergency fund is not another Eftpos account to dip into. Nor is it for planned expenses such as holidays.
It's meant to be a financial buffer.
This is the time to scrutinise every dollar and ask honestly: is it a need or a want?
A great place to start is the supermarket, where lateral thinking can reduce the bill considerably. Not everything on supermarket shelves is a need.
I told a friend who was in the process of transitioning to a single income how I work on $3 per plate for protein as a rule, thanks to the Love Food Hate Waste campaign. It works. The concept left her a bit speechless.
Also be aware that some personalities lurch from one crisis to the next. If that sounds familiar, then consider getting third party help.
A good place to start is a budgeting centre or Citizens Advice Bureau, which can refer you to more specialised assistance if you need it. Sometimes the issue sits in our psychological make-up, not our budgeting skills.
An emergency fund works best tied into a bigger financial plan.
Sorted.org.nz's Goal Planner and Budget Planner can be helpful. Everyone's brain works differently, and for some people, a budgeting app such as PocketSmith or Westpac's CashNav app might work better. For others, a simple spreadsheet is the answer.
I gave Gemini, Google's AI engine, some realistic figures of what someone might earn and spend on rent each month in New Zealand, and asked it to create a personal financial plan. I couldn't fault anything it said.
I then asked Gemini to put its recommendations into a spreadsheet. It didn't give me a spreadsheet, but it did go into great depth explaining how to set one up, including all the formulas and the exact cells to copy them into.
Finally, think of your emergency fund as an act of self-care and empowerment.
Start small. Stay consistent. Your future self will thank you.
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