How much should your emergency savings fund be?

Updated: Nov 17, 2021

If you had an emergency and needed to come up with $400 right now, could you do it?


Many of us only have enough money to get from one payday to the next. And some of us would only be able to cover our expenses for a week or less if our income suddenly stopped.

If a real emergency were to arise, having an emergency fund protects us from high-interest loans, credit card debt and a lot of stress.


Emergency funds can save the day if you need them, but it can be tough to know how much to save. According to a popular rule of thumb, you should aim for between three-six months’ worth of expenses.


How much is three to six months’ worth of expenses?

To calculate how much you need for your emergency savings fund, you will need to look at your annual expenses. To do this, download your bank statements and credit card statements for the past year. Add up all of your expenses — this includes housing costs, utilities, food, clothing, entertainment, travel and everything else. Make sure to exclude transfers between your bank account and your credit card.

To make sure your expenses are complete:

  • Look at your total annual expenses (not just one month’s expenses as this will not include those “once in a while” expenses)

  • Record the total expenses for the year and divide this number by 12 months. This will be your total monthly expenses.

  • Multiply your total monthly expenses by three (or six if you want to protect yourself further), and that’s how much you should save.

How to build your emergency fund

  • Don’t make your emergency savings fund easily accessible. Set up a separate online bank account, preferably a savings account that is not linked to your everyday bank account.

  • Automate your savings. If you automate your savings, you’re more likely to succeed. Decide how much you can afford to save each month, then set up automatic deposits into your savings account after you get paid.

  • Make the most of “extra” money. If you come across “extra” money, such as a tax refund, side hustle income, inheritance or even a $10 note on the footpath, deposit it in your emergency fund to reach your goal sooner.

If you need immediate financial help and you’re in New Zealand, you can call the free financial helpline Moneytalks on 0800 345 123 or text 4029. Moneytalks connects people and whānau with their local foodbanks, helps them find their way through Work and Income processes and entitlements and supports people to manage their money.