Emergency Fund Calculator

Target = essential monthly spending x the number of months you want covered. Months to build = what is still needed / what you can save each month. Essential spending means what you would still have to pay with no income - housing, utilities, food, transport, insurance and minimum debt payments. Not your normal budget.

Three months or six?

It depends on how quickly your income could be replaced. Two earners in steady jobs with in-demand skills can reasonably sit at three. One income, or self-employment, or a specialized role in a small field, argues for six to twelve. Being a single earner supporting other people pushes it up.

Should I use income or expenses?

Expenses, and essential ones. Sizing the fund off gross income produces a target so large that most people give up before starting. In a real emergency you cut the extras immediately, so the fund only has to cover the things you cannot cut.

Where should I keep it?

A high-yield savings account or a money market account - somewhere you can reach the money within a day or two, with no risk to the balance. Not in stocks, which fall hardest in exactly the recessions that cost people their jobs, and not in a CD that locks it up.

Should I build this before paying off debt?

Build a small starter fund first, around one month of essentials, then attack high-interest debt, then come back and finish the fund. Without a starter fund, the first unexpected car repair goes back on the credit card and the cycle restarts.

What counts as an emergency?

Losing income, a medical bill, an urgent car or home repair. A vacation, a wedding and holiday spending are not emergencies - they have dates on them and belong in a separate savings goal. Keeping the two apart is what stops the fund from quietly draining.

What if I use it?

That is what it is for. Use it without guilt, then make rebuilding it the next priority. A fund used and refilled did exactly its job; the failure mode is having to borrow because it was not there.