Emergency Fund Calculator:
How Much Should I Save?

Calculator Definitions

When using the emergency fund calculator, you’ll likely input the following monthly expenses to ensure accuracy:

• Rent or mortgage: This expense only includes the amount you pay to your landlord or mortgage lender. If you put money into an escrow account for taxes, include that amount as well. Property taxes and PMI may be factors to add, too.

• Utilities: Consider using an average amount you pay for bills such as electricity, sewage and water, as some months may be higher or lower than others.

• Telecom charges: Costs include internet, phone (landline and/or mobile access), and other related expenses.

• Insurance: This can include health, car, and homeowners insurance. If you included homeowners insurance above (as part of the escrow charges), eliminate them here.

• Transportation: Includes expenses such as parking fees, gas, car maintenance, public transportation, and toll expenses.

• Credit card and/or loan payments: Put all non-mortgage debt here, including car loans, personal loans, student loans, and minimum monthly credit card payments.

• Food: Include your usual costs, such as food from grocery stores vs. spending lavishly on dining out.

• Other costs: Any necessities you pay aside from any of the above categories can go here. Expenses can include daycare fees, child support, medications, and uniforms required for work.

How Much Should I Save In an Emergency Fund?

A general rule of thumb is your emergency fund should have at least three to six months’ worth of expenses. That way, if you experience a job loss or a drastic drop in income, you still have the means to pay your bills or debt obligations without resorting to high-interest credit cards. The actual amount of your emergency fund will depend on factors such as your existing expenses and income situation.

That’s not to say you have to save this amount up right away. You can start small and build your way up to this amount. Even several hundred dollars set aside in the meantime can give you a financial cash cushion.

How to Calculate an Emergency Fund

Calculating your emergency fund as accurately as possible requires a few straightforward steps.

1. Determine Your Essential Monthly Expenses

Calculating how much you spend each month is key to understanding the correct amount for your emergency fund. Start by looking at what your essential spending needs are, including housing, transportation, and food. Other financial obligations include debt payments, insurance premiums and other recurring bills.

One of the simplest ways to find out how much you spend on necessities is by looking at your bank and credit card statements. Consider averaging your costs over several months, especially if your spending fluctuates depending on the time of the year.

2. Consider Your Family’s Situation

Some individuals or families may have work or personal situations where they’ll need to save more. For example, if you are self-employed and are the breadwinner in the family, it may make sense to set aside at least six months’ worth of expenses in case your employment situation changes. Same goes for those who may have a traditional 9-to-5 job, but the industry you work in is fickle or volatile based on how the economy is faring.

Anyone who doesn’t have risk factors such as increased health risks or multiple dependents may be able to get away from saving less. Typically, though, this is the answer to “How much should I have in an emergency fund?”: Financial experts recommend having no less than three months’ worth of basic living expenses set aside in case of an emergency, such as a major medical bill or job loss.

3. Consider How You’ll Feel Financially Secure

Ultimately, the amount you need to save depends on how much will help you feel financially secure in an emergency. If you want to save more than several months’ worth of expenses to help you sleep better at night, then as long as you can afford to, go ahead. However, if you need to free up your cash for other types of spending, saving less for now can also be fine. Any type of emergency savings is better than none.

You might want to automate savings by having a recurring transfer made from checking, right after you are paid, into your emergency savings account, where it can be accessible but still earn interest and grow.

How to Start an Emergency Fund

You can choose from a variety of strategies that can help you move towards your emergency savings goal.

1. Define Your Savings Goal

Setting a specific goal can help you to monitor your progress and keep you motivated. Since establishing an emergency month can take many months, figuring out your end goal can help you to see whether you’re on track. Work backwards to see what’s a realistic amount to save each month — start with how much you want to save and divide it by the number of months it’ll take.

2. Set Up Automatic Transfers

As mentioned above, setting up recurring transfers can help you consistently and automatically save. Or you might set up reminders so you don’t forget to transfer money to your emergency fund. Even if you believe you have enough in your bank account to cover the transfer, regularly check your transactions so that you don’t risk any overdrafts or failed payments.

3. Find Ways to Adjust Spending

Looking at what you’re currently spending on can help you see where you can make adjustments. If you’re able to cut back on expenses, it may be a smart choice to set that money aside for your emergency fund. Or, find a way to adjust your bill due dates with creditors and utility companies so you may have times where you have more money to transfer to savings.

4. Take Advantage of Financial Windfalls

Perhaps you get a larger than expected tax refund, or received a cash gift from your aunt for your birthday. Any amount counts, and if you can afford to go without the funds for the time being, you can use a windfall towards your emergency fund.

5. Reflect and Celebrate Your Progress

Working towards a financial goal over months can feel tiring if you’re not sure whether you’re hitting your target. To keep yourself motivated, check your savings progress, and do something small to celebrate.

Where Should You Keep an Emergency Fund?

A smart place to put an emergency fund is in a separate bank account, one where you won’t need regular access. A separate account can prevent you from spending it and you know exactly how much there is should you have to draw from it.

You likely want to open an account where you can maximize the amount you earn, but not risk losing your initial deposit. A high-yield savings account — ideally one with no monthly fees — can be a great choice.