Emergency fund: how much to save and how to get there

What an emergency fund is

It’s a pot of money set aside only for the unexpected: an urgent car or home repair, a medical bill, losing your job or time off sick. It isn’t for holidays or planned purchases. Its job is to make sure a surprise doesn’t force you to take out a loan or pay with a credit card.

How big it should be

The usual advice is to have three to six months of essential expenses. Note that we’re talking about expenses, not income: add up housing, utilities, food, transport, insurance and debt repayments.

• Three months: if your job is stable and there are two incomes at home.
• Six months or more: if you’re self-employed, your income varies or there’s only one income.

For example, if your essential expenses are €1,500 a month, the goal would be between €4,500 and €9,000.

Where to keep it

The fund needs to be easy to access and shouldn’t suddenly lose value. So:

• Keep it in an account separate from your everyday one, so you don’t spend it by accident.
• Choose a savings account or deposit that lets you access the money within a few days.
• Avoid investing it in shares or products that could fall just when you need them.

How to build it step by step

1. Work out the target: multiply your monthly essential expenses by the number of months you want to cover.
2. Set a small first milestone: for example, €1,000. Reaching it is very motivating.
3. Save automatically: schedule a transfer to the fund’s account on the day you get paid.
4. Use extra income: bonuses, tax refunds or gifts can go straight into the fund.
5. Review it every quarter: if your expenses go up, the target should too.

When to use it, and how to top it back up

Ask yourself whether the expense is unexpected, necessary and urgent. If it is, use the fund without guilt: that’s what it’s for. Afterwards, switch the automatic transfer back on until the amount is restored.

Emergency fund or paying off debt?

If you have high-interest debt, such as credit cards, start with a small fund (one month of expenses) and put the rest of your savings towards paying it off. Once it’s cleared, build the fund up to three or six months.

How Calers helps

In Calers you can create an “Emergency fund” goal with the amount and date you want and link it to your savings account: the percentage reached updates automatically with the balance. If you schedule the monthly transfer, the balance forecast shows you when you’ll reach the goal.