Money
Emergency: this boring money hack could change your life

I love a good investing hack or a spicy saving idea. But right now, I’m going to tell you something so boring, so beige, so dull that it might actually be the most powerful financial move you make. It’s how to build an emergency fund for people over 50.
By Alex Brooks
I’m going to introduce you to the surprisingly underrated world of the emergency fund. A savings stash that can be your buffer against bad markets (and bad luck and even bad power blackouts).
No, it’s not thrilling. But according to this 2022 study, having a stash of emergency cash (or money you can spend in a crisis) is one of the strongest predictors of financial wellbeing, especially if you’re an average or low-to-middle income kinda person.
Now there are 2 kinds of financial curveballs that can knock people off balance:
- Income shocks: like losing your job or being forced to pocket a lower retirement income due to sharemarket declines.
- Expense shocks: like a broken car, a dead fridge, or a surprise out-of-pocket medical or dental bill.
Both suck. But research shows that income shocks hit much harder emotionally than expense shocks. They mess with your entire sense of financial security. Income chocks can trigger that scary “what if this is permanent?” spiral. And if you’ve done your retirement planning sums based on different income amounts, it’s just plain rude for the money Gods to mess around with you.
For those of you in the post-retirement phase of collecting your superannuation money as a lump sum or pension, then you’ll know that sharemarkets have gone all topsy Trumpy, and are as up and down as a toddler on a trampoline.
(Read these 5 investment strategies if you want some general advice on how to handle volatile markets but read on if you aspire to carve out an emergency fund for people over the age of 50.)
Retirement emergency funds are an insurance policy
Volatile share or property markets are one reason why an emergency fund JUST IN CASE is a great plan to have.
A buffer fund can help you cover expenses without selling investments. This can be a vital way not lock in losses early in retirement that could reduce your income potential for years. (This is known as ‘sequencing risk’ and you can read more about it in this story.)
To be clear, it’s important to also maximise how much you accumulate inside your superannuation – which is one of the most tax-effective income streams you can access. It’s usually NOT advisable to save your emergency fund within your super, as it can be hard to get access before your preservation age.

Most of us will struggle to find exactly the right answers to the eternal question of how much to spend today versus save for tomorrow – there is no right answer, only what’s right for you.
(Hint: plan to make your retirement income last exactly as long as you do and have an emergency buffer in place to let you duck and weave, too.)
A note about risk profiles and how much to have in an emergency funds
Exactly how much money to put in your emergency fund depends on your investment risk profile and your current financial circumstances.
A good rule of thumb from MoneySmart is that you should have enough to cover 3 months of living expenses.
But if you want your emergency fund as a buffer to avoid ‘sequencing risk’ – the danger that poor investment returns early in retirement reduce savings faster – then you may want more like a year or 2 of living expenses in your fund.
Steps to build your retirement emergency fund
There are a couple of different approaches to get the money together for your emergency fund, depending on your financial circumstances.
- Find ways to save, save, save every week or month to accumulate the magic amount you want to put into an emergency fund. Read how to categorise and strategise to save money in this story about the 5 numbers to know by age 50.
- You could leverage the home you live in and the mortgage you have on it. Whack your savings into a mortgage offset account and draw on it as and when you need, with the goal of being mortgage-free at the same age you want to start de-accumulating your super
- Another option is to start investing in something safe (like a bank term deposit) or something riskier (like directly holding shares) or something middle of the road (like a managed investment) outside of superannuation.
Read more about your investment risk profile on Citro – the more money you have, the more risks you can take in search of higher returns on your emergency stash.
The other important tip? If you live in a bushfire or flood risk area, make sure to have $500 to $1000 cash on hand at home in the event of a power blackout that prevents access to online banking. Cash can be king in a natural disaster kind of emergency…
1. Find emergency fund saving habits that motivate you
Incremental and ‘small change’ saving moves like cutting out your daily coffee or buying sale items at the supermarket are not as powerful as big money moves that align to your values, behaviour and future goals.
Embracing simple moves like budgeting and paying down debt are obvious, but what about experimenting with ‘smart splits’ and finding easy ways to divide your money?
For example, the one-third smart split rule divides your income into 3 equal parts – pay one-third into debt repayment (especially if you have a mortgage or credit card debt), one-third into savings and keep one-third for living expenses.
The 50:30:20 rule is similar to the one-third rule – spend half your income on necessities, 30% on discretionary items like going out, travel or haircuts and the final 20% is allocated to savings or debt repayment.
You can also think of your savings as being like a house with many rooms. Are some of those rooms sitting empty? Maybe consider taking in a lodger or hiring out the household items you rarely use?
Look at your driveway. Two cars. Two insurance payments. Two petrol tanks to fill. What if just one car did the job?
And then there’s your fridge and pantry, which is probably packed. What if, instead of wandering the supermarket aisles each week, you started meal planning or used up what’s already in the pantry and fridge before buying something else?

Saving shouldn’t be about sacrifice so much as creating intentional (and sustainable) behaviours that make putting money away a regular habit. Try this AMP budget planner calculator as a tool.
It goes without saying that lower income earners find saving harder. But Australia does offer support for low-income earners, through things like financial counselling, no interest loans and financial education like the Saver Plus program (which offers free education and financial bonuses). Services Australia also runs a free Financial Information Service.
When you have even a few thousand dollars saved into an emergency fund, your brain can relax a little. You’ll sleep better. You’ll maybe even argue less with your partner about whether you can afford takeaway tonight.
Mental health and money can be best mates once you know you have an emergency buffer on hand.
2. Leverage your home (and home mortgage or home equity)
Renting in retirement is likely to deliver more financial stress than you’d like.
Most of you know that having a paid-off home is a pre-requisite for retirement – it keeps your cost of living lower, maximises your Age Pension eligibility from age 67 and keeps your options open to downsize.
Owning your own home without a mortgage also gives you retirement ‘back up’ options like the federal government’s Home Equity Access Scheme or a home reversion or even a reverse mortgage if you start running low on funds.
Once you’re officially ‘retired from work’, the way you choose to structure your housing can affect the income stream you later rely on in retirement.
Some people choose to downsize to an over-55 style of housing that frees up more capital while others will move to a different retirement location in Australia or overseas to get more lifestyle for less.
3. Keep your emergency fund stashed where it helps you most
For some people, having easy access to an emergency fund through their bank account makes sense.
Setting up an emergency fund that’s hard to touch and earns you interest is a great step. Automating transfers the moment your account receives money treats savings like it’s rent or electricity – non-negotiable.
There’s a good list of high interest savings account options for Australians on CHOICE. And another list of good banking apps at this link.
For others, term deposits will make your money work harder, and managed investments might be even better again.
Buying shares – and reinvesting the dividends – can also act as a pseudo ‘emergency fund’, as you can usually sell a parcel of shares and have the cash in your account within a day or two.
An emergency fund isn’t just about surviving emergencies and futureproofing your income from sequencing risk – it’s also about buying freedom, confidence and fewer sleepless nights. So, maybe not so boring after all…
This article contains general information only. It is not financial advice and is not intended to influence readers’ decisions about any financial products or investments. Readers’ personal circumstances have not been taken into account and they should always seek their own professional financial and taxation advice that takes into account their financial objectives, needs and circumstances.
Feature image: Canva/Rutchapong Moolvai
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