Calculate how much you need

You can easily calculate how much you’ll need to save for a rainy day.

Overview

A general rule of thumb is to have enough in your emergency fund to cover 3 to 6 months of living expenses. The exact amount depends on your personal circumstances, including job stability, health status, and financial obligations.

For a salaried employee, 3 - 6 months savings should be enough.

Anyone with a less regular income such as freelancers, consultants, or self-employed professionals should add a little extra buffer (along the lines of 6 - 9 months of expenses).

Business owners, entrepreneurs or anyone that will need a lot of time to find a new income stream in case of losing their current income should consider saving on the top end of this scale.

Calculating your monthly expenses

Determining how much you spend every month is the first step to working out your required emergency savings. It's important that this should include essential expenses that you would also be required to contribute to in the case of an emergency.

A quick framework to work this out is thinking of the following expense categories and add them up.

• Housing: Rent or bond payments, rates, levies, homeowners or renters insurance.
• Utilities: Electricity, water, gas (if applicable), and municipal services.
• Communication: Mobile phone charges, internet, television subscriptions.
• Food: Grocery shopping, meals out.
• Transportation: Vehicle payments, petrol, taxi fares, public transport costs.
• Healthcare: Medical aid premiums, out-of-pocket expenses for doctors' visits, medications.
• Personal and Family Care: Childcare, school fees, personal grooming, clothing.
• Debt Payments: Credit card payments, personal loan payments, student loan payments.
• Entertainment and Leisure: Movie tickets, outings, travel, sports, and cultural events.

Tools you can use

If you want to a deeper understanding of your expenses there are tools that can help you track these and categorise them so you can get a better handle on you expenses.

• FinWise
• 22Seven

Deciding how many months you need

The number of months you need is more art than science. An important feature of your emergency savings fund is to give you peace of mind.

The most impactful financial setback you're likely to face is a loss of income so think about how long you feel comfortable surviving without an income. For most people that number is usually 3-9 months based on factors like job stability, other household income sources, or personal circumstances.

Some thoughts about why you might choose different levels of emergency savings are:

3 Months

Suitable for individuals with stable jobs in dual-income households. This amount is sufficient for minor emergencies and short-term financial disruptions. For example, if one person temporarily loses their job, the other's income can help mitigate the impact.

6 Months

Recommended for single-income households or those in industries with higher job volatility. This buffer offers more security, allowing more time for job searching without immediate financial strain.

9 Months

Best for freelancers, self-employed individuals, or those in highly unstable job sectors. This extended safety net supports longer periods of unpredictable income and covers extended emergencies, such as prolonged illness or industry downturns.

Example

Suppose your total monthly expenses amount to ZAR 20,000. If you choose to save for six months (a common choice for moderate stability), the calculation would be:

This number is the total amount you should aim to have saved in your emergency savings fund. Calculating it helps you to set savings goals based on your personal financial situation.