How to start 2026 with a strong financial foundation

An emergency fund is one of the cornerstones of financial security. It’s designed to act as a buffer when life doesn’t go to plan — whether that’s an unexpected car repair, a period of reduced income, or an unforeseen medical expense.

As a general rule, an emergency fund should aim to cover three to six months’ worth of living expenses. This provides reassurance that you can manage short-term shocks without relying on credit or dipping into any longer-term savings you have set aside.

Keeping rainy-day cash in an account that allows quick access ensures it’s available when you need it most. Emergency funds are different from invested savings, which may fluctuate in value or be harder to access at short notice. 

Many people also find it helpful to automate contributions, setting up regular transfers so the fund grows steadily until you have reached your target emergency savings amount. 

Another important step at the start of the year is reviewing how your money is invested and whether it still reflects your goals, timeframe and comfort with risk.

There are no completely risk-free choices when it comes to managing money. Holding large amounts of cash exposes your savings to the negative impacts of inflation, while investing can grow your wealth over time but this is never guaranteed. 

That said, some investments are riskier than others. For example, investing in a small private company is generally considered higher risk, while inflation-linked UK government bonds are considered lower risk. As a rule, the higher the potential return of an investment, the higher level of risk it carries. 

Understanding your risk tolerance — how comfortable you are with fluctuations in investment value — is essential. This involves not only assessing your emotional comfort with potential losses but also your financial capacity to withstand them. This is a deeply personal assessment, influenced by factors such as your income, time horizon, financial commitments, and your own knowledge and experience with investing.

Financial advisers use risk profiling tools to help ensure investments are aligned with your circumstances. Alongside this, diversification — spreading investments across different asset types — can help reduce your exposure to market volatility. 

One of the simplest ways to build momentum early in the year is through automation.

As you’re setting your household budget, decide on an amount you can comfortably save each month and contact your bank to set up a monthly automatic transfer. Automating this process reduces the risk that you’ll forget about or be tempted to neglect your savings.

Pension contributions can also be automated. Your employer should be able to confirm whether you’re enrolled in your workplace pension scheme and adjust your contribution levels. Increasing your contributions even by a small amount can make a meaningful difference over time. 

High‑interest debt can make it harder to progress financially, so it’s important to stay aware of what you owe and keep a clear plan in mind.

If debt feels overwhelming, speaking with someone you trust — and particularly a free, impartial service such as MoneyHelper — can help ease the mental burden.

Kicking off the year with a strong financial foundation doesn’t have to be daunting. Start with small, achievable steps and let the sense of accomplishment fuel your progress. 

These early actions can help ensure your finances are working quietly in the background, giving you the confidence to focus on what matters most in the year ahead.

This article is for information purposes only. It is not intended as financial advice.

Fees and charges apply.

The value of investments and the income from them can fall as well as rise and are not guaranteed. You might not get back your initial investment.

The retirement benefits you receive from your pension plan depend on a number of factors including the value of your plan when you decide to take your benefits which isn’t guaranteed and can do down as well as up. The benefits of your plan could fall below the amount(s) paid in.

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