Emergency Fund Calculator

An emergency fund is the money that stops a bad month becoming a debt. This works out how big yours should be from your own essential spending, how far along you already are, and how long the rest will take at the amount you can save each month.

How many months you actually need

Three to six months of essential expenses is the usual advice, and the range matters more than the midpoint. Lean toward three if your income is salaried and stable, your household has a second earner, and your job would be straightforward to replace. Lean toward six or more if you are self-employed, paid on commission, the only earner, or working somewhere a job search would take months.

If the full figure looks impossible, it usually is — at first. A common approach is to bank a smaller starter amount, around $1,000, before anything else. That is enough to absorb most car repairs and medical copays without reaching for a credit card, which is the specific outcome an emergency fund exists to prevent.

Essential expenses, not all expenses

The figure to base this on is what you would still be paying in a month with no income: housing, utilities, groceries, transport, insurance, and the minimum payments on any debt. Not dining out, not subscriptions, not holidays. Sizing the fund against your whole budget produces a target so large that most people give up on it, and it is answering the wrong question — you would cut the discretionary spending in the month you needed this.

Where to keep it

Somewhere you can reach in a day or two and where the balance does not move: a savings account, not an investment account. Money you might need at short notice is the one place the growth in the compound interest calculator is the wrong goal — a fund that fell 20% the month you were made redundant would have failed at its only job.

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