How to Calculate Your Emergency Fund

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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

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

Choosing your coverage period

Situation	Recommended coverage	Rationale
Permanent employee, stable income	3–6 months	Steady pay, statutory redundancy rights, notice period provides buffer
Single income household, variable pay, niche industry	6–9 months	Harder to replace income quickly; variable pay means uneven cash flow
Freelancer, contractor, self-employed	9–12 months	No employer safety net, income gaps between contracts, IR35 risk

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

Emergency Fund Target = Monthly Expenses × Coverage Months

Where

Monthly Expenses= Sum of essential monthly outgoings — housing, bills, food, transport, other necessities (£)

Coverage Months= Number of months the fund should cover (typically 3, 6, 9, or 12)

Gap = max(0, Target − Current Savings)

Where

Target= Emergency fund target amount (£)

Current Savings= Amount already saved toward the emergency fund (£)

Months to Target = ⌈Gap ÷ Monthly Saving⌉

Where

Gap= Remaining amount needed (£)

Monthly Saving= Amount saved each month toward the fund (£)

Worked example

Couple renting in Manchester, 6-month target

Monthly essential expenses

£800 rent + £300 bills + £400 food + £200 transport + £300 other = £2,000

= £2,000/month

Emergency fund target (6 months)

£2,000 × 6 = £12,000

= £12,000

Gap (current savings: £3,000)

£12,000 − £3,000 = £9,000

= £9,000

Time to target (saving £500/month)

£9,000 ÷ £500 = 18 months

= 18 months

Result

Target: £12,000 — save £500/month for 18 months to close the £9,000 gap

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

Test case	Input	Expected target	Expected gap	Source
3-month minimum	£2,000/mo expenses, 3 months, £1,000 saved	£6,000	£5,000	HSBC calculator
6-month recommended	£3,500/mo expenses, 6 months, £5,000 saved	£21,000	£16,000	HSBC calculator
Time to target	£1,500/mo expenses, 6 months, £0 saved, £500/mo saving	£9,000 (18 months)	£9,000	SmartMoneyTools calculator
Already funded	£2,000/mo expenses, 6 months, £15,000 saved	£12,000	£0	Mathematical identity
Zero expenses	£0/mo expenses, 6 months	£0	£0	Mathematical identity