"Three to six months of expenses" is the usual answer, but it's a wide range. Three numbers narrow it down to something you can actually aim for.
1. Your bare-bones month
Not your current spending, just what you'd need if income stopped: housing, utilities, groceries, insurance, minimum debt payments, transport. For many households this is 60-75% of normal spending, and it's the number the fund is measured in.
2. Your risk score
Add a month to a three-month base for each that applies:
- Single income household, or one income covers most of the bills
- Self-employed, commission, or seasonal work
- An industry with long job searches or frequent layoffs
- Dependants, an older car, or an older home that will need repairs
- High insurance deductibles
Zero or one: three months is reasonable. Four or more: aim for six or more.
3. Your starter target
A full fund takes time, so set a first milestone of one bare-bones month (or a fixed amount like $1,000) to stop small emergencies from going on a credit card. Then build toward the full target.
Example
Bare-bones month: $2,400. Risk factors: single income and commission pay, so 3 + 2 = 5 months. Target: $12,000, with a starter goal of $2,400. At $300 a month, the starter goal takes 8 months, and showing that timeline is often what makes people start.
Where to keep it
Somewhere separate from everyday spending, easy to reach in a day or two, and earning interest, such as a high-yield savings account or a money market account.
Free tools
- Emergency fund calculator (enter your monthly costs and months of cover)
- Emergency fund spreadsheet (free CSV for Excel / Google Sheets)
- High-yield savings calculator
- Emergency fund on irregular income
- 42 free budget templates (pay what you want, $0 is fine)
General information, not personal financial advice.
— Smart Budget Sheets