Emergency Fund Calculator

An emergency fund is the money that stops a bad month from becoming a financial crisis. When a job ends, an illness strikes or the roof leaks, people with cash set aside deal with the problem; people without it borrow at high rates or sell investments at a bad time. The practical question is how much is enough, and the answer starts with what you must keep paying, not with what you earn.

Count the essentials

List what has to be paid even if your income stops: rent or the loan instalment on your home, groceries, electricity, water, phone and internet, transport to work, insurance premiums and the minimum payments on debts, plus a line for other essentials such as medicine or childcare. Leave out meals out, subscriptions, travel and shopping, which you can cut. The page gives each of these a field and adds them to a monthly total, with defaults that add up to 42,000.

Choose the months of cover

The target is the total times the number of months you want to be covered. The rules of thumb are three months if your income is stable and you have two earners, six for a single income, and nine to twelve if you are self-employed, in a volatile industry, or supporting dependants. They are guidelines, not laws, and your own judgment about how long it would take you to find new income matters more.

A worked example

With the defaults, essential spending is 42,000 a month, and a six-month target is 2,52,000. Savings of 60,000 give a runway of 1.4 months, so 1,92,000 is still to be saved. Adding 10,000 a month, the target is reached in 1 year and 8 months. The page also shows the target for 3, 6 and 12 months side by side: 1,26,000, 2,52,000 and 5,04,000. In the freelancer sample, with nine months of cover, savings of 1,20,000 and 15,000 a month, the target is 3,78,000, runway is 2.9 months, 2,58,000 is still to save, and it takes 1 year and 6 months.

Reading runway

Runway tells you how long you could live on your savings if income stopped tomorrow, assuming you cut to the essentials. It is a more honest number than the balance itself. A person with 60,000 might feel comfortable, but at 42,000 a month that is less than six weeks. Use it to decide how urgent building the fund is and to see how each month’s saving extends it.

Building it faster

The quickest ways are to save first and spend the rest, to move any windfall such as a bonus or a tax refund into the fund, and to temporarily lower the essentials, for example by pausing extra debt payments or a gym plan. Once the target is reached, the page says so, and you can redirect the monthly amount to investments.

Limits

The calculator does not include the cost of one-off emergencies such as a large medical bill or an urgent repair, or health insurance deductibles, which you might add as an extra essential line. It also assumes the fund earns nothing, which is cautious. Prices rise, so revisit the total every year.

Related tools

• Sinking Fund Calculator handles expenses that come with a date, such as annual insurance.
• 50/30/20 Budget Calculator shows how much of your income can go to savings in the first place.
• Net Worth Calculator shows where the emergency fund sits among your assets.
• RD Calculator values a monthly deposit if you build the fund in a recurring deposit.