Emergency Fund Calculator

Use this easy emergency fund calculator to estimate how much you should keep in your emergency fund.

How to Use This Emergency Fund Calculator

Calculating your ideal emergency fund is simple: you only need a few pieces of information to use the tool.

• Monthly housing expenses (including rent, mortgage, utilities, etc.)
• Monthly health insurance premiums
• Monthly debt payments (student loans, credit cards, etc.)
• Monthly grocery bill
• Other monthly expenses (car insurance, subscriptions, etc.)

The calculator adds up how much you need to pay your expenses for 3-6 months, which is a good starting point for an emergency fund.

How Much Money Should I Have in My Emergency Fund?

Experts agree that you should be prepared to cover 3-6 months of expenses if you were to lose your income, so that’s what this calculator estimates.

For example, the average American spends $1,900 on housing, $650 on health insurance premiums, $1,200 on debt payments, $450 on groceries, and $300 on other expenses each month.

To be prepared for 3-6 months without income, the average person should have an emergency fund of $13,500-$27,000. Your ideal emergency fund amount can be higher or lower, depending on your monthly expenses.

Emergency Fund Definitions

Emergency fund – An emergency fund is money set aside in case of an emergency such as a burst pipe, an unexpected car repair, or a loss of income.

High-yield savings account – A high-yield savings account has an APY 10-20x higher than its traditional counterparts, but this high return comes at the cost of convenience.

High-yield savings accounts typically have variable rates, withdrawal limits, and other restrictions.

Certificates of Deposit (CDs) – A certificate of deposit is a financial product that offers a guaranteed return on your investment over a predetermined period.

Money Market accounts (MMAs) – A money market account combines features from both checking accounts (like a debit card and check-writing privileges) and savings accounts (like a higher annual return), but comes with some restrictions like a minimum balance and withdrawal limitations.

Average monthly expenses – If you lose your income, you risk losing things like housing, transportation, and food. By measuring your average monthly expenses, you can estimate how much you need to save to maintain your essential living expenses in the event of an emergency.

Existing liquid savings – Liquidity is the financial concept of being able to access your money. For example, a 401(k) is not fully liquid before the age of 59½, because until then, you can’t access your funds without steep penalties.

Liquid savings, on the other hand, are accessible in the short term, meaning you can go to the bank and withdraw cash anytime you choose.

How to Build an Emergency Fund

1. Use the calculator to determine how much you need to save

Contrary to the common saying, a journey of a thousand miles doesn’t begin with the first step: it begins with a destination. By using the calculator to determine your emergency fund amount, you can set a goal to pursue.

2. Set a monthly savings goal

Once you know how much your emergency fund should be, set a goal for how long you want to reach that goal. On interest-bearing accounts, the earlier you save, the more your money will multiply, so start early and make regular contributions essential.

3. Determine expenses you can get rid of

Reducing your expenses is helpful for two reasons: first, it helps you save more aggressively, reaching your emergency fund goal quicker. Second, it makes your emergency fund last longer or reduces the amount you need to save.

4. Stick to your plan

Rome was not built in a day, and neither is an emergency fund. The key to building your fund isn’t sporadic savings, but rather long-term consistency.

5. Have an accountability partner

Saving money is hard, especially when you have things to spend it on. Two heads are better than one, so enlisting a friend to keep you accountable can essentially double your willpower.

Accountability is mutually beneficial if you and your partner share similar goals.

Where to Keep an Emergency Fund?

High-yield savings account

One of the best places to keep your emergency fund is in a high-yield savings account where it can accumulate interest. While these types of accounts don’t allow frequent withdrawals, they are beneficial for an emergency fund where you’ll only infrequently need to access funds.

CDs

A certificate of deposit has the advantage of a high annual yield, but the disadvantage of less flexibility. To get the best of both worlds, you should put part of your money in a CD where it can accumulate high-interest rates, and the rest in other types of accounts where you can access your funds sooner if you need to.

Money Market account

Money market accounts have some limitations—such as a delay to withdraw funds, a minimum balance, and fluctuating interest rates—but they’re a relatively safe short-term place to keep your emergency fund that can command a high return.

Index Funds

An index fund is a collection of stocks and bonds that mimics a financial market index without the expenses of a managed fund. In other words, an index fund lets you take advantage of the stock market with lower fees.

While index funds have lower fees, they’re still speculative, which means that their value fluctuates based on the market.

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