If you are bleeding £180 a month on credit card interest while your savings account sits empty, you might be asking: is an emergency fund a priority or should I focus on my debts?
Some traditional advice says having 3-6 months' of expenses is the absolute must, while Reddit’s Personal Finance flowchart claims that if your debt is above 10% APR, pay this off before building an emergency fund. So which is it?
The case for 3 months: Why debt warriors go lean
The maths can be brutal: a £5,000 balance on a 22% APR card can cost £1,100 in interest a year, while an emergency fund of the same size earns maybe £200 at current savings rates. That is £900 lost for being cautious. Aggressive debt repayment creates compounded savings – every £100 paid off saves £22 annually for the remainder of the loan. The psychological momentum matters too, as you watch balances plummet each month.
The 6-month safety net: Security above all else
Self-employed workers and zero-hours contractors face a different reality. A few years ago, it was found that one in seven UK workers is in the gig economy, which means volatile income. Tech redundancies are hitting 90,000 in 2025 and hospitality never fully recovered post-pandemic.
Single-income families can't afford the lean approach as one redundancy pulls the entire rug out. Emergency savings while in debt may make more sense in these circumstances. The mental health dividend of emergency savings is greater for those with unreliable income. Given that emergency loans will likely cost more than your current debt, it is best to build 6 months of liquid cash before clearing your debts.
Debt vs savings: Why not both?
In truth, it is not a decision between one or the other. There is an 80/20 split, which can cater to both, spending £400 monthly on debt and £100 on emergency savings. This ratio can begin closer to 50/50 if you are anxious about redundancy and, as you get close to your goal, you can adjust the ratio. Interest rate, too, can impact the ratio, with above 20% APR demanding more like 90/10. This small-but-growing cash buffer can prevent taking payday loans and avoid the risk of entering a debt trap.
Your personal decision matrix
Psychology plays an important role, as those who are naturally anxious may want to adopt the strategy that better helps them sleep at night. But, we don’t want to be fully swayed by emotions, so here is an objective matrix to apply to yourself:
Score your job security: permanent role (1 point), notice period exceeding 3 months (1 point), scarce skillset (1 point).
If you scored 3, your three months of emergency fund may suffice. If you scored below 2, you may want to consider six months as your minimum.
Assess your support network: would family provide £2,000 interest-free in a crisis? Do you have two incomes? Can you access credit at below 15% APR? Each 'yes' can reduce your previous score by one month each, down to a minimum of three.
Assess debt risk: higher APR debt can be high risk and requires immediate attention. Debt with interest rates in the single digits (including mortgages) is low-priority and can be repaid gradually. This can help inform your hybrid ratio, ranging from 90/10 to 10/90, which you apply in getting to your target fund.
Reality check
If you are struggling with fear or guilt, you can decisively choose an approach and stick to it by opening a separate instant-access account – visibility drives behaviour. How much money you need in your emergency fund changes as your employment, debts or family situations shift, so do a quarterly review. But in the meantime, set-and-forget with direct debits as much as possible. Even £500 saves you from payday loans when a crisis hits, so anything between three and six months puts you ahead of the pack.
