Emergency Fund Calculator
An emergency fund is used to cover mandatory expenses, aka non-discretionary expenses, that must be paid if you suddenly lose your source of income (hence the emergency!).
Provide your info below to find out how much should be in your emergency fund.
What are the non-discretionary (mandatory) expenses covered by my Emergency Fund?
Non-discretionary expenses are (by definition) essential expenses, occurring monthly or annually, that are required to be paid, regardless of loss of income. These items include but are not limited to:
Day-to-Day Living Expenses
- Gas, Parking and Tolls
- Auto/Home Maintenance Costs
- Utility Bills
- Loan Payments (Mortgage, Car Loans, Personal Loans, etc.)
- Credit Card Payments
- Netflix, Hulu, other subscriptions
Insurance and Health Care Costs
- Insurance Premium Payments (Health, Homeowners/Renters, Life, Disability, Auto, etc.)
- Insurance Deductibles/Copayments
Other Non-Discretionary Expenses
- Alimony/Child/Parent/Dependent Support
- Tuition and Education Expenses
- Association Fees/Dues
A few notes:
- If you pay any of these amounts annually, you’ll need to divide that amount by 12 to get the monthly cost. For expenses occurring less frequently than annually (such as copays and deductibles), estimate how much you will spend in total over a certain number of months and divide by the number of months to get the monthly cost.
- For items like health insurance, which you would typically lose when you lose your job, you should research the monthly cost of a similar health insurance plan or the cost of COBRA (which your employer should be able to give you) and include that premium as your health insurance cost.
- If you provide any charitable or religious contributions monthly, add those into this amount as well.
How many months of non-discretionary expenses should I cover?
Experts say you should have anywhere from 3 to 6 months of your non-discretionary expenses in a savings account, with some even saying (since the Great Recession) 9 months. But for the average American, even 3 months seems impossible, as a recent survey showed that most individuals can’t afford a $400 emergency. Additionally, every job is different, with some providing protection from job loss because of tenure, unions, or severance pay.
So how much should you really have in your emergency fund? Although you may not like the answer, the truth is you should save as much as you’re comfortable with, but at the very least cover 1 month of non-discretionary expenses, with a maximum coverage of 9 months. Anything above 9 months may be excessive and better put towards other goals.
Where should I stash my emergency fund?
You should set aside the money for your emergency fund in a separate savings accounts (preferably online for higher rates and hidden away from view), as putting the cash in an investment account doesn’t provide easy access when you need the money quickly.
Just remember, your emergency fund is not meant to be saved and then later used for a vacation you’ve always wanted; That should be a separate account.