How Much Should You Have in Your Emergency Fund?
Tracey Louis, Staff Editor
How Much Should I Save For My Emergency Fund?
If you recently asked yourself this exact question, you’re certainly not alone! In fact, you’d be surprised how many people have little or no money set aside for the times when unexpected (and, in most cases, unfortunate) events occur.
The amount you should save for an emergency fund isn’t a fixed number, nor is it a percentage of your total monthly income. And if you were to ask your peers or family about the amount that needs to be saved, they would more than likely tell you three to six months’ worth of your income.
In most cases, this simply isn’t true.
The fact of the matter is that the amount you save for emergencies greatly depends on your financial, personal, and mental situation. Here are just a few questions you should ask yourself before you plan an emergency savings fund:
Financial: What’s your annual income? If you’re married, what’s your combined annual household income? Do you have any investments? Are you an aggressive investor or do you play it safe? Are you in credit card debt? Do you have medical bills? Are you saving for other goals such as your child’s education or retirement? Do you have a secondary source of income that isn’t an investment?
Personal: What kind of saver are you? Are you disciplined enough to put away a set amount (or percentage) of your net income every month? Are you married or single? Do you have children? How reliable is your vehicle? How often do you go on vacation? Do you spend lavishly on new technology like smartphones? Do you buy new clothes or browse the thrift shop?
Mental: Are you a risk taker? Do you suffer from financial anxiety? Do you plan for the future or do you take things one day at a time? Are you an optimist or pessimist?
These are all questions that need to be asked when calculating your emergency fund. Without answering them, there’s no way to tell exactly how much you’ll need when the “you-know-what” hits the fan.
Luckily, we’ve made things easy for you! Below, you’ll find a simple calculator that will tell you approximately how much you’ll need to save for emergencies. It takes less than two minutes...and the results may surprise you!
Emergency Savings Fund Calculator
Section 1: Your Financial Status