The car needs an urgent repair, or the boiler stops in January. If the money isn't there, it goes on a credit card or an overdraft, and next month starts in the red.

In short: an emergency fund is a few months of your essential costs kept somewhere you can reach the same day. Start with one month, aim for three, and go towards six if your income is irregular or you're the only earner. How long it takes is simple: the missing amount divided by what you can set aside each month.

Three milestones
  1. 1 month of essentials
  2. 3 months
  3. 6 months, if your income is uncertain

A worked example

Made-up but realistic, the same person as in the monthly budget example: essentials of €1,450 a month, €1,000 already saved, and €480 a month they can set aside.

How far the fund is from each milestone
TargetStill missingMonths at €480
1 month€1,450€4501
3 months€4,350€3,3507
6 months€8,700€7,70017

7 months

How long it takes this person to go from €1,000 to a three-month fund of €4,350, saving €480 a month

The €1,000 they have today covers less than a month of essentials. The first milestone is one month away. The three-month fund takes seven.

If they can only set aside €250 a month, the same €3,350 takes 14 months. That's slower, not a failure: the first month of cover still comes within two months, and that's the one that stops a broken boiler from turning into debt.

How to build it

1. Count essentials, not salary

Rent or mortgage, utilities, groceries, transport, insurance, medicine and minimum loan payments. Leave out restaurants, holidays and subscriptions you'd cancel in a crisis. Use your real numbers from bank statements (expense tracking shows how). A fund sized on salary is bigger than you need and takes longer to build.

2. Pick the number of months

  • 1 month: the first target for everyone. It covers most repairs and surprise bills.
  • 3 months: the usual target for a stable job with a regular salary.
  • 6 months or more: if you're self-employed, your income varies, you're the only earner in the family, or finding a new job in your field takes time.

3. Keep it separate and reachable

A separate savings account at your bank, with instant transfers, is usually the right place. It should be easy to reach in an emergency and slightly annoying to reach on a Friday night. Don't invest it: a fund that's down 15% the month you lose your job isn't doing its job.

4. Make the transfer automatic

Set up a standing transfer on payday. Saving what's left at the end of the month rarely works (monthly budget, step 4).

5. Refill it after you use it

Using the fund isn't failing, it's what it's for. Afterwards, go back to the same monthly transfer until it's full again.

What it's not for

  • Bills you know are coming. Yearly insurance, car tax or Christmas aren't emergencies. Divide each by 12 and save for it separately, otherwise the emergency fund keeps getting used and never grows.
  • Paying off cheap debt faster. Build at least the first month of cover before making extra loan payments (paying off a loan early explains when extra payments pay off).
  • Investing. Once the fund is full, the extra monthly amount can go to longer-term goals (savings priorities).

What this calculation leaves out

The target is based on today's costs. If your rent goes up or a child arrives, recalculate. It also ignores interest: an instant-access account pays little, and the fund isn't there to earn, it's there to be available.

Calculate your own

The free emergency fund calculator does the same sum with your numbers: enter your monthly essentials, what you already have and what you can set aside. With €1,450, 3 months, €1,000 and €480 you'll see the same 7 months.

One thing to do today

Open a separate savings account if you don't have one, and set up a transfer for payday, even a small one. The first month of cover is the milestone that matters most.

See also