The formula
How to calculate emergency fund
An emergency fund is cash held deliberately idle so that a broken boiler or a lost job does not become a credit card balance. It is sized in months of essential spending, not as a share of income.
The number of months depends on how quickly your income could be replaced. Two salaried earners in a stable sector can defend three months; a single earner, a contractor or anyone with irregular income should be closer to nine or twelve.
The inputs, one by one:
- Essential monthly costs — rent or mortgage, utilities, food, transport, insurance, minimum debt payments — not holidays or subscriptions you would cancel
- Months of cover wanted
- Already saved
Results appear immediately — there is nothing to submit. Changing a field rewrites the link, so you can share the exact scenario you are looking at.
Worked example
Work through the defaults on this page:
- Essential monthly costs: 2,100
- Months of cover wanted: 6
- Already saved: 4,000
That gives:
- Target fund: 12,600
- Still to save: 8,600
- Months covered today: 1.9 months
Reading the result
The months-covered figure is the one to watch, because it moves when your spending moves. A pay rise you spend reduces your cover even though the balance has not changed.
Where this goes wrong. Holding the fund somewhere it cannot be reached within a day or two defeats the point. A 90-day notice account paying half a percent more is not an emergency fund; an easy-access account is, even though the rate looks worse.
Build a small buffer first — one month of essentials, or around £1,000 — then attack high-interest debt, then finish the fund. Without any buffer the next unexpected bill goes straight back onto the card you are trying to clear.
It cannot really, and chasing that defeats its purpose. Its job is to be there in full on the day you need it, which rules out anything that can fall in value. Accept the drag and keep the balance under review as your costs rise.
The answer it gives you is target fund. With 2,100 essential monthly costs, 6 months of cover wanted and 4,000 already saved, that comes to 12,600. Change any field and the figure moves with it.