Three months of expenses, at $300 a month, takes two and a half years

“Three months of expenses” is the figure people usually hear for an emergency fund. It is a rule of thumb, not a requirement, and it is a different number for every household. If your month costs $3,000, it is $9,000, and saving $300 a month gets you there in 30 months.

First, what a month costs

The target is three times what you spend, not three times what you earn. Those can be far apart. Add up rent or mortgage, food, bills, transport, insurance and minimum debt payments. If you have not done it before, the budget calculator adds up whatever you type and shows the total.

This article uses $3,000 a month as its example, which makes the target $9,000.

Then, how long at what you can save

With nothing saved yet and no interest at all:

The amount you can put away each month decides nearly everything. Going from $200 to $300 takes fifteen months off.

What interest adds

Put the same deposits into an account paying 4%, as an example, and the dates barely move:

• $200 a month: 42 months, not 45.
• $300 a month: 29 months, not 30.
• $500 a month: 18 months either way.

Over a period this short, interest is a small help. The faster you save, the less time there is for it to do anything. It matters far more on a balance that already exists than on one being built. The savings calculator shows the balance after any number of months, so you can try your own figures.

What this does not know

• Whether three months is right for you. It depends on how steady your income is, who relies on it, and what else you could fall back on. That is your judgment.
• What your month really costs. Bills that come once a year are easy to leave out and make the true figure higher.
• What else the money could do. Paying down a debt that charges more than the account pays is a different sum, and this one does not make it.

These are estimates from example figures, not financial advice.