Start from essential costs, not income
Your fund needs to cover the costs you couldn't avoid if your income stopped: rent or mortgage, utilities, groceries, insurance, transport and minimum debt payments. Leave out wants such as eating out or holidays, because you would cut those in a real emergency.
If you have tracked where your money goes, you already have this number. It is usually lower than your take-home pay.
Choose 3, 6 or 9 months
The site's emergency fund calculator multiplies your essential costs by a number of months based on how stable your income is. If you sit between two categories, pick the larger one: a slightly bigger fund costs you little, while one that runs out too soon can push you into debt. A couple who share costs can work out one fund for the household's essential costs.
- 3 months – stable income, for example a permanent job, or two incomes in the household.
- 6 months – average stability, for example a single income or a job in a field that changes often.
- 9 months – unstable income, for example freelance, seasonal or commission work, or a single income supporting dependants.
A worked example
Your essential costs are €1,200 a month. The three targets are €3,600 for stable income (1,200 × 3), €7,200 for average (1,200 × 6) and €10,800 for unstable (1,200 × 9).
Say your income is average, so your target is €7,200. You already have €1,200 saved and can add €200 a month. The gap is €6,000 (7,200 − 1,200), which takes 30 months to fill (6,000 ÷ 200 = 30).
Break a big target into milestones
Thirty months can feel like a long way off. Mark milestones along the way: one month of essential costs, then three months, then the full target. Each one already makes you safer than before.
If you get a pay rise, a tax refund or a bonus, putting part of it into the fund shortens the time. Once the fund is full, the money you were saving each month can go to your next goal.
Review it once a year
Your target moves when your life does. A higher rent, a new child or a switch to freelance work can all change your essential costs or your stability, so check the number at least once a year.