How to Calculate Your Emergency Fund

Summary

An emergency fund is a cash reserve held in an instant-access savings account to cover unexpected expenses or income loss. The UK’s Money and Pensions Service (MoneyHelper) recommends saving three to six months of essential outgoings — not total income, not total spending, but the minimum you need to keep a roof over your head and food on the table.

The exact target depends on your circumstances: stable salaried employment needs less buffer; freelance or variable income needs more. The goal is simple — if your income disappeared tomorrow, how many months could you survive on savings alone?

How it works

1. Add up your essential monthly expenses — housing, bills, food, transport, and other non-negotiable costs.
2. Choose a coverage period based on your situation (see guidance below).
3. Multiply to get your target fund.
4. Subtract what you’ve already saved to find the gap.
5. Divide the gap by your monthly saving rate to find how long it will take.

Choosing your coverage period

Source: MoneyHelper recommends 3 months as a minimum; CFP Board and Vanguard recommend 3–6 months as standard; r/UKPersonalFinance wiki recommends 9–12 months for variable income.

The formula

Worked example

Inputs explained

• Rent / mortgage — your monthly housing cost, the largest essential expense for most people
• Bills — energy, water, council tax, and other regular household charges
• Food & groceries — essential food spending (not dining out or takeaways)
• Transport — commuting costs, fuel, public transport passes
• Other essentials — insurance premiums, minimum debt payments, prescriptions, childcare
• Coverage period — how many months the fund should cover (3, 6, 9, or 12)
• Current savings — what you’ve already saved toward your emergency fund
• Monthly saving rate — how much you can set aside each month

Outputs explained

• Gap to fill — the amount you still need to save (target minus current savings)
• Target fund — total emergency fund needed (monthly expenses × coverage months)
• Monthly expenses — your total essential outgoings
• Progress — percentage of target already saved
• Time to target — how long until the fund is fully built at your current saving rate

Assumptions & limitations

• The calculator uses a simple linear model — it does not account for interest earned on savings while building the fund. In practice, a high-yield savings account (currently 4–5% AER in the UK) would shorten the timeline slightly.
• It assumes constant expenses — in reality, expenses may increase with inflation. Consider re-running the calculation annually.
• The calculator does not factor in existing emergency resources such as income protection insurance, statutory sick pay, or redundancy entitlements, which may reduce the required buffer.
• Essential expenses are subjective — two people with identical incomes may have very different essential costs. The calculator lets you define what’s essential for your situation.
• The fund should be held in an instant-access account — not investments, not locked savings. The point is immediate liquidity when you need it most.

Verification