Big unexpected expenses always arrive without warning — a broken fridge, a medical bill, a gap in work. If your account is empty then, you end up plugging it with a card loan or overdraft, and taking on interest too.
That's what an emergency fund is for. In short: build up 3–6 months of living expenses, and keep it in a "parking account" or CMA — somewhere you can withdraw anytime that still pays interest. Keep it out of investments, or you may have to sell at a loss right when you need it.
How much to save
- Stable salaried job — start with 3 months of expenses.
- Irregular income (freelance/self-employed) — aim for 6 months or more.
The base here is one month of living expenses, not your salary. If you spend ₩2.5M a month, three months is ₩7.5M. Don't let the number scare you — just set the target.
Where to keep it — parking accounts and CMAs
An emergency fund must be instantly withdrawable and stable in principal. So stocks and funds don't fit. Instead:
- Parking account — a checking account that pays interest even for a single day's deposit. Common at internet and savings banks.
- CMA — a brokerage cash account that also accrues daily interest.
A plain checking account pays almost nothing, so the same money in a parking account or CMA stays useful without being idle. (Rates change often — compare when you open one.)
How to build it
Trying to deposit a big sum at once means you never start. Auto-transfer a small amount every payday into a parking account. Once you hit the target, redirect that auto-transfer toward investing or saving.
FAQ
Can the emergency fund share an account with savings?
Mixed together, you'll spend it while telling yourself "this is emergency money." Separate money with different purposes into different accounts — it's easier to protect.
Three months feels impossibly large.
You don't need it all at once. Make "one month" your first target and let the satisfaction carry you forward.
Once the fund is full, what's next?
Then move spare money toward tax-advantaged/investing options like ISA and pension accounts (see the separate articles).
An emergency fund isn't money that earns — it's money that protects you. The point isn't to grow it, but to have it ready the instant you need it.
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