Emergency Fund Calculator

Essentials, not income

If your income stopped, you would not keep spending at your current rate. Housing, food, utilities, transport, insurance and minimum debt payments continue; restaurants, subscriptions and holidays do not. Sizing the fund on essential expenses typically produces a target 25 to 40 per cent lower than sizing it on income, which makes it achievable rather than theoretical.

How many months depends on how replaceable your income is

Three months suits a household with two stable incomes, because both would have to fail at once. Six is the usual advice for a single stable income. Commission-based, seasonal or self-employed income needs more, because the gap between jobs or contracts is longer and less predictable. Anyone whose role takes months to replace should sit at the upper end.

Where it should sit

An emergency fund needs to be available within a day or two and must not fall in value when you need it — which rules out anything invested in markets. A high-yield savings account or money market fund at an insured institution is the usual answer. In the US, FDIC insurance covers $250,000 per depositor per insured bank per ownership category, which comfortably covers a typical fund.

Where the money sits matters as much as how much it is

An emergency fund has one job: be available in full, at face value, on the day you need it. That rules out anything whose price can fall when you have to sell. It also argues for keeping the balance inside federal deposit insurance limits, which cover $250,000 per depositor, per insured bank, for each ownership category, at FDIC-insured banks and the equivalent NCUA cover at credit unions. Interest matters far less than access; a fund that earns two points more but takes a week to reach is the wrong instrument.

Size the fund against fixed obligations rather than total spending. In a genuine income interruption, discretionary spending falls immediately, but rent or mortgage, insurance, utilities, minimum debt payments and food do not. Households with variable income, a single earner, or a specialised role that takes longer to re-hire into sit at the upper end of the three-to-six-month range, and often beyond it.

Frequently Asked Questions