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As the saying goes, life happens. Since it just happens and we have no control over emergencies, it’s super important that we’re financially prepared for them. This is why you should always work to have an Emergency Fund, just in case of emergencies.
Experts agree that everyone should have 3 – 6 months’ worth of expenses in their emergency fund. You can use this Emergency Fund Calculator to figure out how much you need to have saved up.
Monthly rent or Mortgage: Here you enter what your monthly rent or mortgage payment is. Don’t include items like utilities. If it’s a mortgage, then include your escrow payment in there as well
Monthly utility payments: These are your household utilities such as Water, Sewer, Gas, Trash, etc
Monthly transportation expenses: Here you enter everything that relates to your transportation needs. If you own a car, include your monthly car payment, gas, etc. If you use public transportation, include how much you spend on uber, trains, etc every month.
Monthly debt payments: These are all your minimum monthly payments that you pay towards debt. These are credit cards, personal loans, etc.
Other essential monthly expenses: If there are any other monthly expenses that don’t fit into any of the categories above, enter them here.
Once all your info has been entered, the calculator will automatically calculate how much you should have in your emergency fund. 6 months worth of your monthly expenses is the safest bet!
How about if you’re starting from scratch?
If you have absolutely nothing saved or very little in your emergency fund, that’s okay too. Everybody starts from $0 but with patience and consistency, you can also build up your emergency fund.
3 to 6 months saved up adds up to be quite a lot of money for most. Using me as an example, I need about $12,800 saved up in my emergency fund to cover 6 months of expenses. When I started at $0, this seems like an impossible task. But just like a marathon, it only takes the first step to get started.
What I recommend doing is to break up your emergency fund savings goals to $1,000 chunks. Your first Target should be to save up $1,000 in your emergency fund. Once you’ve saved up $1,000, then your next Target is having $2,000. Month after month, year after year, you’ll always be changing that goal until you reach your 3 to 6 months off expenses saved up.
Let’s get one thing out of the way. Don’t store your emergency fund in cash. Because of depreciation, storing this money in plain cash means that loses value over time. You don’t want that. Instead, opt to save it into high-yield savings accounts or invest it into easy to access bonds.
For saving your money in a high-yield savings account, don’t use traditional banks. These Banks typically have very low-interest rates. Instead, use services like the Robinhood high-yield savings account or Betterment’s high-yield cash reserves.
If you’re interested instead in Saving your money in safe bonds, then consider using Betterment. I personally save my emergency fund in this type of account. All accounts are FDIC-insured so you can rest easy knowing that your money is safe.
Definitely check out Robinhood and Betterment when considering where to stash your emergency fund and check out their features.
Automate your saving
Do you know what the most effective way of saving is? It’s when you don’t have to think about it and it’s automatic. Automating your saving is hands-down the best way you can get started saving if you haven’t already.
If you have to consciously move money around between savings accounts or investing it every time you got paid, it’s easy to forget or not to do it at all. If you instead set up automatic deposits into your emergency fund bucket, such as Betterment, then you set it and forget it. Your money is saved every single month without you having to do anything.
In no time, you’ll learn to live without that 50 or $100 monthly deposit. With the magic of high-yield interest, your money starts working for you. You can save up a lot of money using this method.
I’ve written an article explaining how you can automate your finances and make your financial life that much easier and more rewarding. Definitely check it out.
Use apps to help you save
Here is a bonus to for you. Instead of just saving a portion of your paycheck oh, you can accelerate accelerate saving by using different apps that help you save more money.
I personally recommend using the app Acorns, especially if you’re a beginner. Acorns rounds up your everyday purchases to the nearest dollar and invest your change. So if you bought something for $5.50, Acorns takes $0.50 and invests it for you automatically. A super useful tool and promotes saving money! Definitely check it out.
Determine the right amount for your emergency fund by calculating your monthly expenses. This includes rent or mortgage payments, utilities, groceries, transportation, insurance premiums and any other recurring bills. Multiply this total by the number of months you would like to have covered by your emergency fund.
Start by taking a look at your bank account to see what you usually spend each month.Then multiply that number by three or six to get an idea of how much you should save for your emergency fund.
Those include things like rent or mortgage payments, utilities, healthcare expenses, and food. If your monthly essentials come to $2,500 a month, and you're comfortable with a four-month emergency fund, then you should be set with a $10,000 savings account balance.
For many people, $5,000 would be inadequate to cover several months' expenses in the event of job loss or an expensive emergency. If that is the case for you, $5,000 would not be considered an overfunded account.
While the size of your emergency fund will vary depending on your lifestyle, monthly costs, income, and dependents, the rule of thumb is to put away at least three to six months' worth of expenses.
A $20,000 emergency fund might cover close to three months of bills, but you might come up a little short. On the other hand, let's imagine your personal spending on essentials amounts to half of that amount each month, or $3,500. In that case, you're in excellent shape with a $20,000 emergency fund.
Wiping out high-interest debt on a timely basis will reduce the amount of total interest you'll end up paying, and it'll free up money in your budget for other purposes. On the other hand, not having enough emergency savings can lead to even more credit card debt when you're hit with an unplanned expense.
An emergency fund is money that you set aside to cover unexpected, expensive events—like sudden loss of job or major illness. How much money should you have in an emergency fund? Experts recommend that you should have three to nine months of living expenses set aside.
An emergency fund is a cash reserve that's specifically set aside for unplanned expenses or financial emergencies. Some common examples include car repairs, home repairs, medical bills, or a loss of income.
As of May 2023, more than 1 in 5 Americans have no emergency savings. Nearly one in three (30 percent) people in 2023 had some emergency savings, but not enough to cover three months of expenses. This is up from 27 percent of people in 2022. Note: Not all percentages total 100 due to rounding.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
Fewer than half of Americans, 44%, say they can afford to pay a $1,000 emergency expense from their savings, according to Bankrate's survey of more than 1,000 respondents conducted in December. That is up from 43% in 2023, yet level when compared to 2022.
The American Rescue Plan Act of 2021 established a new $1 billion Pandemic Emergency Assistance Fund to assist needy families impacted by the COVID-19 pandemic. States, the District of Columbia, tribes operating a tribal TANF program, and all five U.S. territories are eligible to receive funds.
American households, on average, had $41,600 in savings, based on figures from the Federal Reserve in 2019. In 2022, that amount rose to about $62,500–which not only includes savings, but also assets from checking, money market accounts prepaid debit cards and more.
How do I calculate the emergency fund amount? Add up essential living expenses for one month and multiply that amount by either three or six (this will depend on how much you're most comfortable having in case of emergency).
Most of us have seen the guideline: You should have three to six months of living expenses saved up in an emergency fund. For the average American household, that's $15,000 to $30,0001 stashed in an easily accessible account.
Introduction: My name is Dean Jakubowski Ret, I am a enthusiastic, friendly, homely, handsome, zealous, brainy, elegant person who loves writing and wants to share my knowledge and understanding with you.
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