Emergency Fund Calculator

Understanding Emergency Funds

An emergency fund is your financial safety net for unexpected expenses or income loss. It's the foundation of financial security—the cushion that lets you weather job loss, medical emergencies, car repairs, and other financial shocks without going into debt.

Why Emergency Funds Matter

Without an emergency fund, you're one unexpected expense away from financial crisis:

• Job loss: The average job search takes 3-6 months; longer for specialized or senior roles
• Medical emergencies: Even with insurance, out-of-pocket costs can be substantial
• Major repairs: Cars, appliances, and homes break at the worst times
• Family emergencies: Travel, caregiving, or helping relatives

How Much Should You Save?

The "right" amount depends on your personal situation:

• 3 months: Dual income household, very stable employment, easily transferable skills
• 6 months: Single income, moderate job stability, good employment prospects
• 9-12 months: Self-employed, variable income, specialized career, single parent, or sole breadwinner
• 12+ months: High-risk industry, senior executive (longer search times), expensive medical needs

What Counts as "Essential Expenses"?

Calculate your emergency fund based on your bare-bones monthly expenses:

• Housing: Rent/mortgage, property taxes, insurance
• Utilities: Electricity, gas, water, internet, phone
• Food: Groceries only (no dining out)
• Insurance: Health, auto, life
• Transportation: Car payment, gas, maintenance, or transit pass
• Minimum debt payments: Credit cards, loans (minimum required)
• Essential childcare: If required for work

Do NOT include: Dining out, entertainment, subscriptions, shopping, vacations, or extra debt payments.

Where to Keep Your Emergency Fund

Your emergency fund should be:

• Liquid: Accessible within 1-2 business days
• Safe: FDIC-insured, not subject to market risk
• Separate: Not mixed with regular checking to avoid temptation

Best options: High-yield savings accounts (HYSAs) currently offer 4-5% APY. Consider online banks like Marcus, Ally, or Discover for the best rates.

Building Your Emergency Fund

If you're starting from zero, here's how to build up:

1. Start small: Even $500 handles most minor emergencies
2. Automate: Set up automatic transfers on payday
3. Use windfalls: Tax refunds, bonuses, and gifts go straight to savings
4. Cut one expense: Redirect that spending to savings
5. Increase gradually: Raise your contribution by $25 each month

When to Use Your Emergency Fund

Use it for:

• Job loss or reduced income
• Unexpected medical expenses
• Essential home or car repairs
• True emergencies that can't wait

Don't use it for:

• Planned expenses you should have budgeted for
• Wants disguised as "emergencies"
• Investments or paying off debt (unless truly desperate)

Rebuilding After Using Your Fund

After tapping your emergency fund, make replenishing it a priority. Treat it like a bill—budget a set amount each month until you're back to your target.