Emergency fund: how much cash buffer is enough
Create a liquid reserve for job loss, medical costs, repairs and other unavoidable surprises.
An emergency fund is separate from long-term investments and planned spending. Start by listing essential monthly costs, insurance deductibles, dependants and income stability. Many households work toward several months of essential expenses, but the right amount depends on the person’s situation. Keep the reserve accessible and low-volatility, replenish it after use, and do not count uncertain market gains or credit-card limits as emergency cash.
Eligibility
Everyone can benefit from a reserve; the target should reflect income variability, dependants, health cover, debt and access to other support.
Potential benefits
A cash buffer can reduce the need for expensive borrowing or forced selling during a difficult period.
How to apply
Calculate essential monthly outgo, set a first milestone, automate a transfer to a suitable liquid account or instrument, and review the target annually.