Recently I’ve been asked how much we should have set aside in case of emergency.

The old rule of thumb was around 3-6 months’ income or equivalent. This would cover you in the event of short-term disruption due accident or illness, unexpected job loss or needing to take time off to look after a family member, etc.

These days the advice is a little different, reflecting lessons learned from prolonged disruption such as COVID-19, the structure of the workforce and generally greater awareness of peoples’ diverse mindsets and circumstances.

To be clear, an emergency fund is separate to a savings or day to day expense account and should be seen as a standalone SAFETY NET in the face of financial setback.
Today the guidance suggests 9-12 months of monthly income to be prudent and MORE, for example, if you’re a contract worker, single parent, or looking for more senior placement which can take longer. It could also be LESS depending on how much you earn, your cost of living and so forth.

So, What’s Right for Me?

There will always be a rule of thumb, but what’s right for you depends on your individual needs and circumstances and generally how you relate to financial uncertainty.

If you’d like to work this out and get some tips and tricks on how you can effectively build up your emergency fund book a discovery call with me today.