Emergency Fund Calculator: Check How Much Emergency Savings You Need

Key takeaways: 

• Emergency fund calculator helps you to estimate how much amount should be kept aside to pay for your financial emergencies.

• An emergency fund acts like a safety net so that you do not have to take any debt in emergency situations. 

• You should not depend on your life goal investments for an emergency. It is better to set aside a portion from your salary for such situations. 

Bonus tip: 

Do you know? In India, Fixed deposits have emerged as a most preferred choice for emergency situations. It provides fixed returns and also principal safety. 

 Sudden home repairs, medical emergencies or job loss can cause financial emergencies. It can lead to unplanned debt in case you are not prepared. It is important that you calculate how much amount you need to set aside for any emergency situation. 

Imagine you carry an umbrella only when there is rain. Today, you carried the umbrella thinking it will rain and not because it is raining. Similarly, emergency funds work like this in which an umbrella is the emergency fund and rain is the emergency situation. 

In this the emergency fund calculator will help you estimate how big an umbrella you need for the emergency situation. For example, if you have dependents, EMIs to pay then you need a stronger umbrella to face the situation. 

For instance, I live in a rented flat and I pay ₹15,000 rent. My monthly expenses including groceries, EMIs, utilities and others is ₹25,000 and including rent is ₹40,000. 

For any emergency situation, I want a safety net (emergency fund) of 6 months. I used the emergency fund calculator to estimate the amount to be set aside for any emergency situation. The calculator showed an instant result of ₹2,40,000 which I should keep ideally for any situation. 

What is an emergency fund

An emergency fund is a portion of your income which you keep aside for unexpected expenses. The expenses include any unforeseen medical expenses, home repair or replacement, major car repair or job loss situations. 

Why there is need of emergency fund 

Emergency funds act like a financial armour in many difficult situations. Below are the reasons why you should set aside a portion of your income as emergency fund: 

• It protects you from high interest borrowings. 
• It helps you to preserve long term investment goals. 
• It helps you to maintain emotions and financial stability. 
• It prevents any changes or disruption in your daily lifestyle. 

Sometimes if you do not have enough emergency funds, you might have to use your credit card, take out a personal loan which will cause financial drawbacks. 

What is an Emergency Fund Calculator 

Emergency fund calculator helps you to estimate how much amount should be kept aside to pay for your financial emergencies.

The emergency fund calculator takes into account your monthly living expenses, the number of months for which you want to save the funds, the time it takes to build the fund and the estimated returns the fund will give. The emergency fund calculator therefore estimates the amount to be saved. The calculator gives results within seconds and saves you time. However, the same calculation will take time if you do it manually. 

Three to six months worth of your current living expenses is a good thumb rule as the target amount as an emergency fund. This much amount fits best as a financial buffer to help you face any emergency fund without going into any debt. 

For example 1, I work as a freelance designer and my income is irregular. Below is the list of my daily expenses: 

I used the nerdwallet emergency fund calculator to know my estimated amount of ₹4,50,000 that i need to keep aside as 9 months buffer amount. 

Example 2, Neha is a working woman and earns ₹25,000 per month. Below are her monthly expenses: 

She used the Ramsey fund calculator by choosing the 3 months buffer amount to know the estimated portion of ₹57,000 which is to be kept aside for any emergency situation. 

Different Emergency Fund Calculators

There are many different emergency fund calculators like: 

• HDFC Emergency Fund Calculator
• Standard Chartered Fund Calculator 
• PGIM Emergency Fund Calculator 
• Ramsey Emergency Fund Calculator 
• Nerdwallet Emergency Fund Calculator

You can use any of these emergency fund calculators and there are many more.

Conclusion: 

Overall, an emergency fund calculator is an important online tool to know how much portion of your income you need to set aside for any emergency situation. These emergency situations include loss of job, home repair or major car repair, etc. The emergency fund calculator takes into account your monthly living expenses, the number of months for which you want to save the funds, the time it takes to build the fund and the estimated returns the fund will give.

FAQs: 

Why do I need an emergency fund? 

Emergency funds help you to stay calm and stress free in moments of emergency situations. 

How do I build an emergency fund? 

It is important to determine how much money you need to build an emergency fund. Ideally you should set aside an amount equal to 3-6 months of your expenses into your emergency fund. You can liquidate your funds through the systematic transfer plan. You can start a SIP in a liquid fund. 

What factors determine the accuracy of an emergency fund calculator? 

One of the main factors which determines the accuracy of an emergency fund calculator is your actual monthly expense. 

How much should I save for a good emergency fund?

Ideally you should set aside an amount equal to 3-6 months of your expenses into your emergency fund.

Is an emergency fund really necessary? 

Emergency funds act like a financial armour in many difficult situations. It protects you from high interest borrowings in emergency situations.