Many urban cities are reliant on rain-dependent supply sources such as dams and groundwater. These cities are very dependent on normal rainfall patterns to replenish such supply sources; however, climate change is shifting historical rainfall patterns and exposing the degree of water security vulnerability of cities. Often, governments and water businesses planning bulk water supply projects often act only when water supply levels are at very dire levels, having a range of adverse economic and societal impacts, including higher construction costs due to urgent time frames, reduced investment in the city, lost tourism revenue, heightened anxiety of residents, pressure to take control of water used for food production, to name a few. All such impacts combine to have a severe impact on the city and its residents. There are presently no comprehensive approaches and tools to dynamically model, over long life cycles, the relationship between the frequency and severity of various water vulnerability events, established from city water balance models, and the monetary and non-monetary impacts of such events. This paper presents a systems dynamics model that explores the complex interrelated relationships between vulnerability factors to determine the economic costs of poor water security in a city. The model is applied in the populated south-east Queensland region in Australia, incorporating the linked cities of the Gold Coast, Brisbane (State Capital), Sunshine Coast and Ipswich. The study illustrated that both the frequency and severity of w ater vulnerability events can be reduced by the advanced planning of a portfolio of demand management strategies combined with a mix of rain-dependent (i.e. dams) and rain-independent water supply schemes such as desalination or large-scale advanced recycling plants (i.e. indirect potable reuse scheme). The developed model has implications for water supply infrastructure planners seeking to pro-actively justify and plan rain-dependent (e.g. dams) and rain-independent (e.g. desalination) bulk water supply infrastructure in order to significantly lower the frequency and severity of water insecurity events and thus the significant vulnerability costs.