Emergency Fund Calculator

There's no guarantee when an emergency will hit, so it's best to be prepared to deal with whatever urgent situation arises. If that crisis is financial, an emergency fund can save the day.

Today, we're explaining the appropriate amount of money to save in an emergency fund, how to figure out that sum, how to build an emergency fund, and where it would be wise to keep it.

Calcopolis offers an emergency fund calculator to help you get started.

How Much Money Should I Put In My Emergency Fund?

In your emergency fund, there should be enough money to cover your basic living expenses for at least six months.

Think of your emergency fund as a safety net for when you face a sudden financial hit. It could be a job loss, a family crisis, an illness, or anything in between.

Being prepared with money that you previously set aside can help ease the hardship until you get back on your feet.

How Can I Work Out the Value of an Emergency Fund?

So, you know now that your emergency fund should contain enough money to cover your living expenses for six months.

To figure out how much money this means in your case, you should consider the costs for your essential expenses. In other words, expenses you can't cut from your monthly budget.

These include:

• Mortgage or rent. Also, home/renter's insurance, property taxes, house repairs, and HOA fees.
• Food, groceries, and take-out.
• Utility bills include water, electricity, gas, internet, and garbage.
• Medical expenses, such as medicine, doctors' bills, and health insurance payments.
• Transportation includes public transport, car payments, gas, ride services, and car insurance.
• Debt, such as loans and credit cards.
• Additional expenses, such as child care and personal care.

To help you work out how much you should save for an emergency fund, Calcopolis has an emergency fund calculator that'll provide you with an estimate of the required living expenses for six months.

How Can I Start an Emergency Fund?

To start building your emergency fund, you need to follow the steps below:

1. Determine the Required Amount

The first thing you should do is determine the amount of money that has to be sitting in your emergency fund. You can use Calcopolis's emergency fund calculator for that task.

Your emergency fund should keep you going for at least six months, so staying realistic is important while figuring out the required sum.

Once you have it down, this amount will be your goal.

2. Decide Where the Money Will Come From

Next, you need to start working toward meeting your goal by finding the source of the money you'll be saving.

Budgeting for an emergency fund doesn't mean you should be struggling. Looking at your income and spending patterns will help you achieve your goal.

Try to find corners to cut each month, week, or even day after taking care of your most crucial expenses. The faster you gather the money, the faster you'll reach your target sum.

3. Deposit Money Regularly

Once you come up with a plan to cut expenses and save money, you need to stick to it and start setting the cash aside regularly. 

Renember that even low saving rate is better than nothing.

Our regular saving calculator will help you determine how much you can put aside over time.

Where Should I Keep My Emergency Fund?

The most critical aspects of having an emergency fund are to be able to access the money easily and for the fund to be stable.

Setting up an emergency fund account with a high return rate isn't as important as having quick access to your cash (without losing value) when an emergency hits.

As such, using financial tools such as stocks, long-term CDs (certificates of deposit), or home values isn't a good idea.

Instead, use FDIC-insured saving instruments such as saving accounts, short-term CDs, bonds, and money market accounts.

Wrapping Up

An emergency fund is a priceless lifeline to keep you afloat whenever things take a sudden turn for the worst. Calcopolis's calculator can help you figure out how much you need to save so you can start working on it right away.

After starting an emergency fund and meeting your target sum of money, you can have more peace of mind and start focusing on different saving goals.

Authors

Created by Lucas Krysiak on 2023-04-04 10:15:30 | Last review by Mike Kozminsky on 2023-04-04 11:22:54