Emergency fund: how much to actually put aside

"Six months of expenses" is useless advice until you know what your expenses are. Here is how to work out your own number instead of copying someone else's.

"Save six months of expenses" is the most common piece of financial advice online and among the least useful. It does not say which expenses, does not say where the money comes from, and does not explain why six.

Count survival costs, not spending

The fund has to cover a period without income. In such a period you do not spend what you normally do — holidays, restaurants, cinema and anything postponable all disappear.

So count survival costs: rent or mortgage, utilities, food eaten at home, commuting, medicines, insurance and the minimum payments on your debts. Nothing else.

That figure is often 30–40% lower than ordinary monthly spending. It turns the target from unreachable into realistic.

How many months depends on how fast you would find work

The number of months is not universal. It depends on how long you would look for a new source of income:

• Employment contract, common profession, large city — three months is usually enough.
• Narrow specialisation or a smaller town — six.
• Self-employed, irregular income, a single client — nine to twelve, since there is no notice period and no unemployment cover.
• Two incomes in the household — you can go lower, because losing both at once is unlikely.

The first threshold: one monthly payment

Before you think in months, put aside the amount of your single largest payment — usually rent or a mortgage instalment.

That is the first threshold that genuinely changes something: from then on a broken washing machine or an unplanned dentist visit stops meaning reaching for a credit card.

Where to keep it

The fund must be available within a day and must not lose nominal value. That rules out shares, long-dated bonds and anything you would have to sell at a loss at the wrong moment.

What remains are savings accounts and short deposits. Interest is secondary here — the fund is not an investment, it is insurance.

Keep it in a separate account, not the current one. Money sitting next to your everyday balance disappears without being noticed.

Fund or debt first?

The classic question. In practice: small fund first, then debt, then the full fund. Put aside one or two monthly payments so you do not return to debt at the first breakdown, then focus on repayment, and come back to building the full fund once the expensive obligations are gone.

Clearing debt with a zero fund usually ends with the first unexpected expense rebuilding the card balance.