When moving to a new country, planning is a must, especially when it comes to finances. If your family is moving to Australia, unexpected expenses like medical bills or car repair costs can pop up at any time—and have potentially disastrous consequences for your monthly budget. That said, an emergency savings fund can quickly turn these unexpected costs into minor inconveniences.
At Remitly, we understand the importance of financial security. Building an emergency fund is particularly important for immigrants moving to Australia. It can provide financial cushioning, as well as a financial safety net.
What is an emergency fund?
An emergency fund—sometimes called a rainy day fund—is a form of savings set aside to cover unexpected expenses, helping you stay financially secure during potentially tough times.
For example, you might need an emergency fund to cover urgent medical bills, sudden job loss, car repairs, or last-minute flights home to support your family. Even smaller expenses, like replacing a broken phone or covering rent if a paycheck is delayed, can be easier to manage with savings in place.
Rather than relying on credit cards or taking out a loan, having some emergency savings stored up means you can handle financial surprises without having to divert money from other bills or worrying about how you’ll make up your budget.
How much to save in your emergency fund
Everybody’s needs and financial situations are different, so it’s very difficult to put an exact number on how much you should have in your own emergency fund. That said, there are some common financial “rules” that you can use to figure out what your savings account should look like when living in Australia.
One of the most popular is the 3-6-9 rule. It can help you determine how much you should set aside based on your situation:
- Three months’ expenses: If you have a stable job and low financial commitments.
- Six months’ expenses: If your income is less predictable or you support family overseas.
- Nine months’ expenses: If you’re self-employed or work in a competitive industry.
Factors like the type of Australian visa you hold, job security, and family obligations will also play a role in determining the amount of savings you need to feel safe.
For example, if you’re on a temporary visa and lose your job, finding a new one might take longer due to sponsorship requirements. In this case, a larger emergency fund could help cover rent and bills while you job hunt.
Similarly, if you regularly send money home, you might need extra savings to avoid pausing remittances during tough times. Unexpected costs—like renewing a visa or paying for urgent flights home—can also add up.
Where to keep your emergency fund
You want your emergency fund to be easily accessible whenever you need it, but that doesn’t mean you should be stashing cash under your mattress. While hard currency is instantly available, it’s risky. It can easily be lost or stolen, and it even devalues over time.
You’ll want to choose a highly accessible savings account to keep your money safe and help you earn some interest.
It’s best to have a dedicated savings account for this, rather than keeping the funds in your transactional or chequing account. Mixing your emergency fund with everyday spending money makes it far too easy to dip into for non-urgent expenses.
You should also avoid tying up your emergency fund in investments like stocks or term deposits. While these might offer better returns, it usually takes a while to withdraw money from them, and there’s always a risk that you could lose money if the market goes into a downturn.
The types of savings accounts available in Australia
When choosing where to keep your emergency fund, it’s important to pick the right type of savings account. Here are some common savings account options offered by banks in Australia:
- Standard savings accounts: These offer easy access to your money while earning some interest. It’s good to note that online savings accounts often have better rates than those that you open in a branch.
- Bonus interest savings accounts: These accounts are great for growing your fund as they reward you with higher interest if you meet conditions like making regular deposits or not withdrawing.
- Term deposits: Sometimes called untouchable savings accounts, term deposits lock your money away for a set period (e.g., 3, 6, or 12 months) in exchange for a fixed interest rate.
While bonus interest savings accounts and term deposits offer more attractive interest rates than standard savings accounts, they’re unfortunately not great for emergency savings. A standard savings account is usually the best option.
What to consider when choosing a savings account (and bank)
The first step in choosing a savings account is to make sure the provider you’re considering is an authorised deposit-taking institution. This will ensure that the Financial Claims Scheme will protect your savings (up to the value of $250,000 AUD) if the bank goes belly up.
Next, you’ll want to look at the features of the accounts you’ve shortlisted. Interest rates are an important factor. Be sure to note whether the rates that you’re offered are standard, bonus rates, or honeymoon rates.
Standard interest rates apply no matter what, while bonus interest rates require you to meet certain conditions—like minimum monthly deposits or no withdrawals—before they kick in. Honeymoon rates are higher interest rates that apply for a limited time before they’re reduced, often to below the “standard” rate.
Fees and account conditions also matter. Some banks in Australia charge monthly account fees, while others waive them if you maintain a minimum balance. There are also maximum balance limits, which prevent you from earning interest on savings above a certain amount.
Finally, be clear on the deposit and withdrawal rules. Some accounts require a large lump sum to open, while others require frequent deposits to earn interest. When it comes to withdrawals, some accounts limit how often or how much you can withdraw, while others might delay transfers by a day or two.
Choosing the right mix of accessibility and growth will ensure your emergency fund is both safe and useful.
Steps to start saving for your emergency fund
Like achieving any other financial goal, building an emergency fund takes time. But with the right approach, you can easily build a financial safety net while managing your other responsibilities.
Set a realistic savings goal
Before you start saving, decide how much you need. The 3-6-9 rule can help you figure out a target based on your situation.
If setting aside a large amount feels unrealistic, break it into smaller, achievable steps. Instead of focusing on the total, aim to save a specific amount each week or month. For example, setting aside $100 AUD a week adds up to $5,200 AUD in a year—enough to cover at least some unexpected expenses.
Choose a budgeting method that works for you
You need a plan for managing your income if you want to save consistently.
One popular approach is the 50/30/20 budget, where 50% of your income goes to essentials (e.g. rent, bills, groceries), 30% to wants (like that new pair of shoes), and 20% to savings and debt repayment.
There’s also zero-based budgeting. This might work better when you’re just starting out with a budget, as every dollar is given a specific purpose, so you’re not left with any leftover money that you might be tempted to spend.
The key is to structure your budget in a way that allows you to save consistently, even if the amounts fluctuate.
Automate your savings
One of the easiest ways to save is by automating the process. Setting up a recurring, automatic transfer to your emergency fund each payday ensures you save before spending.
Some banks have a “round up” service where they round the purchase amounts on your card swipes to the nearest dollar and transfer the difference to savings. You’d be surprised how this can add up over time.
When to use your emergency fund
Your emergency fund is there for genuine financial emergencies—unexpected expenses that would otherwise leave you in a tough spot.
A good rule of thumb to help you figure out whether you should pay for something from your emergency savings is to ask yourself, “Is this expense urgent? Is it necessary? Is it unexpected?” If the answer to all three is yes, you can dip into your rainy day fund to pay for it.
Many people fall into two common traps: using their savings too freely or hesitating to use them at all.
Some people dip into their emergency fund for non-urgent expenses, leaving them unprepared when a real crisis hits. Others are so reluctant to touch their savings that they struggle with everyday essentials, even when an emergency fund could help them stay afloat.
For example, if you lose your job and can’t cover rent, your emergency fund is there to bridge the gap while you find work. But if you’re tempted to use it for a new laptop when your old one still works, it’s better to rely on regular savings or plan for the purchase over time.
Securing your future
An emergency fund isn’t just a nice-to-have—it’s an essential part of being financially savvy. Whether it’s covering a medical bill, handling visa costs, or making sure you can still support family back home, having savings set aside gives you peace of mind that you won’t be caught out.
As an immigrant in Australia, knowing where to keep your emergency fund, how much to save, and how to grow it can make all the difference. A little planning now can help you stay financially secure, no matter what life throws your way.
FAQs
What is the best way to start an emergency savings plan?
Setting a realistic savings goal, such as accumulating three to six months’ worth of essential living expenses and automating your savings contributions, is the best way to start and build an emergency savings plan.
What is the 3-6-9 rule in finance?
The 3-6-9 rule suggests saving three, six, or nine months’ worth of take-home pay in an emergency fund, depending on your personal circumstances. For instance, three months might be enough if you have a stable job, while six to nine months might be better if you’re self-employed or have bigger financial responsibilities.
Is $10,000 AUD enough for emergency savings?
Whether $10,000 AUD is sufficient for your emergency savings will depend on your monthly expenses. Calculate your essential monthly costs and multiply the total by the number of months you wish to cover to see how much you need. For example, if your monthly expenses total $3,000 AUD and you want three months’ buffer, you would need $9,000 AUD.
How much money do you need to build an emergency fund?
You should aim to save enough to cover three to six months’ worth of essential living expenses. This amount varies depending on factors like your job stability, income fluctuations, and personal responsibilities.