Emergency Fund Calculator: Exactly How Much Do YOU Need? (2022)

Emergency Fund Calculator Basics

Today we’re talking about an effective and comprehensive emergency fund calculator. While you may have seen a calculator like this before, this one is different because it incorporates a few intangibles such as mental health and just how flexible you can be with your fixed costs.

Of course, we want to ensure we have enough money to cover our finances in the case of an emergency. However, we don’t want to be carrying too much because such a fund does carry some opportunity cost of not having this money invested in more productive investments.

So go ahead, download the calculator, open it in excel, and let’s step through it together.

Emergency Fund Calculator

*My apologies that this calculator is best run and used on a desktop.

I’m currently working on trying to generate a mobile friendly version.

Emergency Fund Calculator: Step 1

Fill in Your Monthly Budget

Quick Description:

Firstly, put in your monthly expenditures for each line item starting at the top and working your way down. Each line item should be self explanatory and most lines include an example if you need some. Secondly, for line items like “Insurance” sum up your total expenditures for insurance including car, house, life, etc. Your total monthly expenditures will be summed at the bottom. This was done so you can quickly see if the numbers make sense when you compare against your monthly budget.

(Video) How To Calculate Emergency Fund With Calculator [New 2021]

Emergency Fund Calculator: Step 2

Can Any Items Be Reduced?

Quick Description:

Next, can any of these budget items be reduced a bit, or even shut off completely during your emergency period? Of course, some cannot when there is a contractual obligation such as a mortgage or car payment. However, some services can be reduced for a period and therefore their monthly costs can be lowered.

Here are the options:

  • No – this line item cannot be reduced as there are contractual obligations behind it
  • Some – this line item can be reduced a bit during this period of time. In the calculator I reduce the line item by 10% – nothing too drastic.
  • Full– this line item can be completely reduced to zero.

Emergency Fund Calculator: Step 3

Optimizers & Influencers

The tricky part with an emergency fund is that not all sizes fit all. As such, this next step attempts to right-size the fund a bit to ensure we have the right amount for you and your needs.

Passive Income Sources

As you might imagine, if you have reliable passive income sources you will be less reliant on an emergency fund. Simply put, the income from these sources can offset your active income if you lose it. So sum up your total monthly passive income streams that you can easily spend in place. Just imagine if this number exceeded your budget items! Topic for another day.

Trusted Assistance

Some people have great support systems in place. If this is you, let’s rely on them a bit and get some help from them. Could they help you offset your monthly grocery bill by at least 25%?

Items of Value

If you think long and hard you might have something in your house, or a collection of things, that have value. Do you think you could round up a bunch of things and sell them for at least $1000?

Mental Health

This last one is important, and it deals with your mental capacity to handle an emergency or job-loss scenario. The fact is, our mental state and health can make a bad situation even worse. Likewise, a strong positive mindset can actually get us up and back on our feet faster.

If you have a family history, or you know you’re prone to depression, then score yourself low on this. The calculation behind this is to increase your fund by the amount of your monthly rent. So if you score a 1, then I’m going to give you one more month of rent or mortgage payment. Opposite effect if you score a 10. As you slide from 1 to 10 the amount will shift with it; 5 has no effect.

(Video) How To: Calculate Your Emergency Fund

Emergency Fund Calculator: Exactly How Much Do YOU Need? (2)

Emergency Fund Calculator: Step 4

Fund Parameters

Lastly, we want to set a few parameters which will give us our final number.

Fund Duration: 3 Months or 6 Months

Often, the first decision we need to make for an emergency fund is if we are going to save 3 or 6 months. To be honest, its very much a personal question and there is no right or wrong answer. Instead consider the following factors which would tend to make one favor a 6 month fund instead of the 3 month fund.

  • You are self employed or a business owner without access to unemployment insurance
  • Working in a volatile market or boom and bust sector
  • Single income in your home
  • You have multiple dependents
  • Other investments you have are not liquid should you need to sell them
  • You highly prize security and stability

Answering yes to many of the above should nudge you towards putting together a 6 month fund.

Level of Curtailment on Spending

No Curtailments

Next, we need to visit how likely you are to cut or curtail your spending during an emergency scenario or job loss. If you want no curtailment then we just take your budget amounts straight across.

Some Curtailments

If are able to put in place a few spending curtailments and shrink your monthly spend then select some curtailment from the picklist. Here we assume you’re able to squeeze out a 10% savings on all the line items except those where you indicated there was no wiggle room.

Heavy Curtailments

Some people can implement a series of heavy curtailments, almost draconian in some ways. If you’re able to implement some heavy curtailments then we calculate the “some reductions” at 85% of normal and drop the “full reductions” by 100%.

Include Influencers

Lastly, you have the option to add and include the influencers from Step 3 or to skip over them.

(Video) Emergency Fund: What is it? Why do you need one? How much money should you save?

Emergency Fund Calculator: Exactly How Much Do YOU Need? (3)

Calculation Examples and Scenarios

Straight and Simple 3 Month Emergency Fund (Default Settings)

If you’re after a simple straight 3 month emergency fund calculator, do the following:

  • Step 1, fill out all budget line items
  • Skip step 2 and step 3
  • On Step 4, set fund duration to 3, no curtailment, skip optimizations and influencers
  • This will give you the quick, simple calculation for a 3 month emergency fund
  • When you open the calculator, these are the default settings.
Most Conservative Emergency Fund

If you would like the most conservative and therefore largest calculation do the following:

  • Step 1,Fill out all budget line items
  • Step 2, set all to No. We want no reductions.
  • Step 3, set $0 passive income, no assistance, no items of value, and set mental health to 1
  • Step 4, set to 6 months fund, no curtailments, yes use optimizations
Most Aggressive Emergency Fund

Honestly, the most aggressive emergency fund would be to skip it altogether. However, this is how you could be aggressive, but still hold an emergency fund:

  • Step 1,fill out all budget line items
  • Step 2, fill this out truthfully, error on the side that yes you could some reduction on most line items if not all. Mark as many as full as accurately as possible.
  • Step 3, accurately set your passive income sources, then set yes and yes to the next two line items. If you don’t have any friends who can help you’ll find some! Mental health, mark this as a 10.
  • Step 4, set to 3 months fund, heavy curtailments, yes use optimizations

Conclusion

Emergency funds are a critical piece of responsible fiancial planning. However they carry an element of irony, that the ones who prepare and get their financial house in order, rarely need them. While the ones who now need them are the ones who rarely prepared for it.

That being said, its better to be safe than sorry and be prepared. I hope this emergency fund calculator has been useful and give you an idea of just how you require given your current needs and financial obligations.

(Video) Emergency Fund: How Much Do I Need? | How Much Money Should I Have in My Emergency Fund?
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FAQs

How much do I need for an emergency fund? ›

Most experts believe you should have enough money in your emergency fund to cover at least 3 to 6 months' worth of living expenses.

How do you calculate emergency fund ratio? ›

Emergency fund ratio or liquidity ratio is a personal finance ratio that measures the ability of a household to meet expenses out of the assets that can be easily converted into cash. It is computed by dividing the total liquid assets of the household by the total monthly expenses of the household.

What's the 50 30 20 budget rule? ›

What is the 50/30/20 rule? The 50/30/20 rule is an easy budgeting method that can help you to manage your money effectively, simply and sustainably. The basic rule of thumb is to divide your monthly after-tax income into three spending categories: 50% for needs, 30% for wants and 20% for savings or paying off debt.

How much cash should you keep at home for emergencies? ›

An emergency fund can serve as your personal safety net during periods of financial stress. While you're working, we recommend you set aside at least $1,000 for emergencies to start and then build up to an amount that can cover three to six months of expenses.

How much should a 30 year old have in savings? ›

Fast answer: A general rule of thumb is to have one times your annual income saved by age 30, three times by 40, and so on.

Is 30k enough for emergency fund? ›

An emergency fund is something that most personal finance experts recommend. In most cases, they recommend having between three and six months of expenses on hand. I've chosen to keep $35,000 on hand for emergencies — a full year of expenses.

How much money should I have saved by 25? ›

By age 25, you should have saved at least 0.5X your annual expenses. The more the better. In other words, if you spend $50,000 a year, you should have about $25,000 in savings. If you spend $100,000 a year, you should have at least $50,000 in savings.

What is Dave Ramsey 25 rule? ›

For decades, Dave Ramsey has told radio listeners to follow the 25% rule when buying a house—remember, that means never buying a house with a monthly payment that's more than 25% of your monthly take-home pay on a 15-year fixed-rate conventional mortgage.

What are Dave Ramsey's rules? ›

Ramsey says to line up your consumer debts “by balance, smallest to largest,” and attack the smallest debt first by paying off as much of it as possible, while making minimum payments on the rest.

Is it better to keep cash at home or bank? ›

“Unlike money in circulation, which loses value over time, money in a bank retains its worth and, on occasion, even climbs in value. A safe financial institution is the only way to ensure the safety of your money,” Dailly said.

Where is the safest place to keep cash home? ›

The safest places include:
  • Safes.
  • Yards.
  • Picture frames.
  • Decoy Safes.
  • Fish tanks.
  • Cat litter boxes.
25 Apr 2022

How much cash can you keep at home? ›

Failure to reveal the source of the money kept in the house can lead to a fine of up to 137 percent. Transactions exceeding Rs 20 lakh in cash in a financial year can attract a penalty. According to the CBDT, it is necessary to provide PAN number for depositing or withdrawing cash more than Rs 50,000 at a time.

Where should I be financially at 35? ›

Saving 15% of income per year (including any employer contributions) is an appropriate savings level for many people. Having one to one-and-a-half times your income saved for retirement by age 35 is an attainable target for someone who starts saving at age 25.

Is 30 too old to start saving for retirement? ›

It's never too late to start saving money for your retirement. Starting at age 35 means you have 30 years to save for retirement, which will have a substantial compounding effect, particularly in tax-sheltered retirement vehicles.

How much does the average American have in savings 2022? ›

This data is the latest available from this source but is from 2019, and some sources put average savings even higher: Northwestern Mutual's 2022 Planning & Progress Study revealed that the average amount of personal savings (not including investments) was $62,086 in 2022.

Is 20k in savings good? ›

If you actually have $20,000 saved at age 25, you're way ahead of the national average. The Federal Reserve's 2019 Survey of Consumer Finances found that the median savings account balance was $5,300 across households of all ages, not just 20-somethings.

Is 10k enough for an emergency fund? ›

It's all about your personal expenses

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.

Is 100k in savings a lot? ›

In fact, a good 51% of Americans say $100,000 is the savings amount needed to be financially healthy, according to the 2022 Personal Capital Wealth and Wellness Index.

How much does the average 70 year old have in savings? ›

How much does the average 70-year-old have in savings? According to data from the Federal Reserve, the average amount of retirement savings for 65- to 74-year-olds is just north of $426,000.

How much money do you need to retire at age 60? ›

Age 50—five times annual salary. Age 55—six times annual salary. Age 60—seven times annual salary.

How much should a 50 year old have saved for retirement? ›

In fact, according to retirement-plan provider Fidelity Investments, you should have 6 times your income saved by age 50 in order to leave the workforce at 67. The Bureau of Labor Statistics' most recent Q3 2020 data shows that the average annual salary for 45- to 54-year-old Americans totals $60,008.

Is 10k emergency fund enough? ›

It's all about your personal expenses

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.

Is saving 1000 a month good? ›

If you start saving $1000 a month at age 20 will grow to $1.6 million when you retire in 47 years. For people starting saving at that age, the monthly payments add up to $560,000: the early start combined with the estimated 4% over the years means that their investments skyrocketed nearly $1.

How much savings should I have at 35? ›

By the time you are 35, you should have at least 4X your annual expenses saved up. Alternatively, you should have at least 4X your annual expenses as your net worth. In other words, if you spend $60,000 a year to live at age 35, you should have at least $240,000 in savings or have at least a $240,000 net worth.

How much money should I have saved by 25? ›

By age 25, you should have saved at least 0.5X your annual expenses. The more the better. In other words, if you spend $50,000 a year, you should have about $25,000 in savings. If you spend $100,000 a year, you should have at least $50,000 in savings.

Is 5k enough for an emergency fund? ›

Assess your emergency savings needs

If you're sitting on $5,000 in savings, it means you only have enough money to cover two months of expenses, not three or more. And if that's the case, you should keep adding to your savings account until you reach at least $7,500.

Is 20k in savings good? ›

If you actually have $20,000 saved at age 25, you're way ahead of the national average. The Federal Reserve's 2019 Survey of Consumer Finances found that the median savings account balance was $5,300 across households of all ages, not just 20-somethings.

How much savings should I have at 40? ›

Here's how much cash they say you should have stashed away at every age: Savings by age 30: the equivalent of your annual salary saved; if you earn $55,000 per year, by your 30th birthday you should have $55,000 saved. Savings by age 40: three times your income. Savings by age 50: six times your income.

How much will $1000 be worth in 20 years? ›

How much will an investment of $1,000 be worth in the future? At the end of 20 years, your savings will have grown to $3,207. You will have earned in $2,207 in interest.

Is saving 500 a month good? ›

Yes, saving $500 per month is good. Given an average 7% return per year, saving five hundred dollars per month for 37 years will end up being $1,000,000. However, with other strategies, you might reach 1 Million USD in 21 years by saving only $500 per month.

Is saving $300 a month good? ›

Yes, saving $300 per month is good. Given an average 7% return per year, saving three hundred dollars per month for 35 years will end up being $500,000. However, with other strategies, you might reach 1 Million USD in 24 years by saving only $300 per month.

Where should I be financially at 35? ›

Saving 15% of income per year (including any employer contributions) is an appropriate savings level for many people. Having one to one-and-a-half times your income saved for retirement by age 35 is an attainable target for someone who starts saving at age 25.

How much money do you need to retire at age 60? ›

Age 50—five times annual salary. Age 55—six times annual salary. Age 60—seven times annual salary.

How much does a married couple need to retire at 55? ›

Experts say to have at least seven times your salary saved at age 55. That means if you make $55,000 a year, you should have at least $385,000 saved for retirement. Keep in mind that life is unpredictable–economic factors, medical care, and how long you live will also impact your retirement expenses.

How much does the average 70 year old have in savings? ›

How much does the average 70-year-old have in savings? According to data from the Federal Reserve, the average amount of retirement savings for 65- to 74-year-olds is just north of $426,000.

How much should a 50 year old have saved for retirement? ›

In fact, according to retirement-plan provider Fidelity Investments, you should have 6 times your income saved by age 50 in order to leave the workforce at 67. The Bureau of Labor Statistics' most recent Q3 2020 data shows that the average annual salary for 45- to 54-year-old Americans totals $60,008.

How much money does the average 40 year old have in savings? ›

Americans at this life stage are reflected in Federal Reserve statistics covering people ages 35 to 44. The Fed's most recent numbers show the average savings for the age group that includes 40-year-olds is $27,900.

Videos

1. Emergency Funds: How Much To Save & How To Get Started
(NerdWallet)
2. Save for the Unexpected (Emergency Fund 101)
(Think Income)
3. Emergency Funds Explained | How much is considered enough? What accounts to save them in?
(Demi Zhuang)
4. How Much To Put In Emergency Fund?
(The Ramsey Show - Highlights)
5. How Much Do I Need In An Emergency Fund? | Ben LeFort | Making of a Millionaire
(Making of a Millionaire)
6. Emergency Funds: How Much Should You Have? | Saving Money for Emergency Fund | Ask A Fiduciary
(Strategic Wealth Designers)

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