Emergency Funds 101: How Big Should Your Fund Be

How to Calculate Your Emergency FundFinancial experts advise an emergency fund savings to equal at least six months’ worth of expenses. If you have other monetary priorities that prevent you from reaching this total right away—such as paying off debt—then pick a smaller number like $1,000 and start building your fund with this total in mind to serve as a temporary cushion while you apply your savings efforts towards getting out of debt. Once you’ve cleared your debt or gotten rid of your other monetary obligations, you can start adding to the $1,000 you’ve already set aside to reach the goal of six months’ worth of expenses.


How to Calculate Six Months’ Worth of Expenses

The easiest way to do this is to examine your monthly budget for all household essentials and multiply this by six. If you are using a financial budgeting software program or app, you can review your expenses of the last six months and use this total as the target goal for your emergency fund savings. Use our nifty Emergency Fund Calculator to find out how much your total should be.

Make sure to account for all essential expenditures including:

  • Insurance (life, health, death, auto etc.)
  • Groceries
  • Loans
  • Utilities
  • Cell phone bill
  • Mortgage payments
  • Incidentals (the random one-offs costs that come up occasionally)
  • Other miscellaneous payments (i.e. those made once or a few times per year)

Everyone’s emergency fund will be different depending on how much you can spend every month and how much you are able to put aside regularly. Also, remember that your savings will be divided between your short-term emergency fund and your long-term emergency fund, with the latter usually containing the majority.

Want to learn more about emergency funds? Check out other articles in our Emergency Funds 101 series:

Emergency Funds 101: What is an Emergency Fund?

Emergency Funds 101: The Key Components

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