How big should your emergency fund be?
An emergency fund covers redundancy, the boiler dying in February, and the dental work your private cover does not. The rule is 3 to 6 months of essential monthly outgoings (rent or mortgage, council tax, utilities, groceries, insurance, minimum debt payments), not your full lifestyle. Park it where you can withdraw it the same day: an easy-access savings account, a Cash ISA, or NS&I Direct Saver. All UK-authorised savings accounts have FSCS protection up to £85,000 per banking licence.
If your essential outgoings are £2,200 a month, target £6,600 to £13,200. Split: £3,000 in an instant-access account paying 4.5% AER for true emergencies, the rest in a 5.0% easy-access Cash ISA. Earning ~£500 a year in interest is a bonus, the goal is having it available on a Tuesday afternoon, not optimising yield.
Stashing the emergency fund in a Stocks and Shares ISA ‘to make it grow’. You will need it on the worst possible day, when markets are also down 30%. The whole point is being immune to timing.
A 60-second lesson on this, with a worked drill, lives inside the Finlo app. Free, forever, on the basics.