1040/15600= 15 months or if you want to break it down further. One year and 3 months to be exact.

1040/15600 ≈ 0.066 15600/1040 = 15 Almost there.

Is this implying that all of your initial savings should go into the emergency fund until the goal amount is reached? And only then use the savings for investing and other purposes in the following months? And, once you have reached your goal (typically 6–8 months of living expenses), should you continue to add to this emergency fund?

Once you have designed a budget for yourself, your plan should include creating a fund for emergencies. That fund has a target amount, which is recommended to be 6 to 8 months of living expenses. Once that account is fully funded, you will have a surplus in your regular income, which won't be devoted to filling your emergency fund. At that time you may choose to work on another goal, such as purchasing a vehicle, home, farm, factory or executive aircraft. If you have no "purchase" goal for that excess income, you might choose to engage in some risky but potentially profitable investment arrangement. Revisit the emergency fund every year or so, especially if your income grows. what was 6 to 8 months of income only a few years ago may be only 4 to 6 months now, so you may have to add more to it.

What are things you should do if you are unable to build a emergency fund due to high living expenses, such as if you live in an area where you're not able to meet minimum housing?

Especially with the high living expenses of today, it can be hard to meet your needs. 1. I think it is better to start small and save up all the spare change you can until it gets to be enough where you can deposit it into an account in a bank. 2. Another thing you can try and do is reason with your boss or manager as to why you need or would benefit from a raise. Most bosses will reason with you and you can try to make a compromise. 3. You can also try and negotiate your bills,e.g.: your electric bill house payment car payment etc. by talking to the moderator of your bills inside of the company to which you pay. Any more questions, just comment on mine! I hope this helps! - Izzy

How would you know how much money your spending a month and what its being spent on?

You either get an app for your phone, and enter every act of spending into it for a few months, or you carry a notebook and pen, and write everything down. In this way, you create a data base for use in future planning.

Yes. This is not an examination. Use the calculator as much as you like.

I find it hard to create my budget due to, too many liabilities, like my younger sibling's education, and my elder sister's marriage. How to manage your budget? if you have such heavy expenses. I can save only 10% at the most. Since I have so many loans to pay for.

If you have many expenses, it will not be very easy to save — if you do, those amounts will likely be pretty minimal. Do what you can to pay for your loans and other expenses while saving a few dollars here and there, and your savings will add up over time.

How can we reduce the time ( no of months) to save for rainy day faster? Are we not saving for retirement in these months or other projects?

You spend less on other things, or you reduce your retirement savings for a while, until you get the rainy day fund full.

Main content

I am ready to save. What is the next step?

Google Classroom

Learn about different strategies for saving.

Savings are like a guardrail for your financial plans - they ensure that even if something unexpected happens, your plan remains in place and you are still building a better financial future.

Emergency fund

If you are following the 50/30/20 rule for budgeting, you are already setting aside

20 %

of your income for savings. Now, let's break that down even further. We already know that having an emergency fund is essential to protecting all aspects of our budget. An emergency fund is where most, if not all your savings should go until that fund reaches its intended amount.

The recommendation is that your emergency fund has three to six months' worth of living expenses/needs in it. Expenses like dining out and entertainment should not be included in this calculation, as they can easily be eliminated in case of an emergency. So, what does that look like in real life example?

Example

Ella, who works as a store manager, has a monthly salary of

$ 5,200

. Ella has decided to start building an emergency fund and knows that she should have three to six months' worth of expenses in that fund. Looking at her monthly budget, Ella identified the following as her essential living expenses:

Expense	Amount
Rent	$$ 1,100$ ‍
Utilities	$$ 220$ ‍
Car payment	$$ 460$ ‍
Insurance	$$ 85$ ‍
Groceries	$$ 600$ ‍
Phone & internet	$$ 129$ ‍

TOTAL	$$ 2,594$ ‍

We can say that Ella has about

$ 2,600

worth of living expenses per month. If her emergency fund is to have three months' worth of expenses, then her emergency fund should have

$ 7,800

in it.

But what if it's six months' worth of expenses? In that case, she should have

$ 15,600

in emergency savings.

Ella has been following the 50/30/20 rule and is saving

20 %

of her income.

If she is going to try and save three months' worth of expenses, it is going to take her about 8 months to do that.

Practice

If Ella's goal is having six month's worth of expenses in her emergency fund, how long will it take her to save the full amount?

(Remember, her goal is

$ 15,600

and she saves

$ 1,040

each month).

\div

months

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Sort by:

Portia
Posted a year ago. Direct link to Portia's post “1040/15600= 15 months or ...”
1040/15600= 15 months or if you want to break it down further. One year and 3 months to be exact.
Button navigates to signup pageButton navigates to signup page
(11 votes)
Answer
- haldirleao
  Posted a year ago. Direct link to haldirleao's post “1040/15600 ≈ 0.066 15600/...”
  1040/15600 ≈ 0.066
  15600/1040 = 15
  Almost there.
  Comment on haldirleao's post “1040/15600 ≈ 0.066 15600/...”
  (24 votes)
caleb
Posted a year ago. Direct link to caleb's post “15,600/1,040=15”
15,600/1,040=15
Button navigates to signup pageButton navigates to signup page
(15 votes)
Answer
Gaurav
Posted 10 months ago. Direct link to Gaurav's post “Is this implying that all...”
Is this implying that all of your initial savings should go into the emergency fund until the goal amount is reached? And only then use the savings for investing and other purposes in the following months?
And, once you have reached your goal (typically 6–8 months of living expenses), should you continue to add to this emergency fund?
Button navigates to signup pageButton navigates to signup page
(7 votes)
Answer
- David Alexander
  Posted 10 months ago. Direct link to David Alexander's post “Once you have designed a ...”
  Once you have designed a budget for yourself, your plan should include creating a fund for emergencies. That fund has a target amount, which is recommended to be 6 to 8 months of living expenses. Once that account is fully funded, you will have a surplus in your regular income, which won't be devoted to filling your emergency fund. At that time you may choose to work on another goal, such as purchasing a vehicle, home, farm, factory or executive aircraft. If you have no "purchase" goal for that excess income, you might choose to engage in some risky but potentially profitable investment arrangement. Revisit the emergency fund every year or so, especially if your income grows. what was 6 to 8 months of income only a few years ago may be only 4 to 6 months now, so you may have to add more to it.
  Button navigates to signup page
  (12 votes)
x.asper (bio)
Posted 9 months ago. Direct link to x.asper (bio)'s post “What are things you shoul...”
What are things you should do if you are unable to build a emergency fund due to high living expenses, such as if you live in an area where you're not able to meet minimum housing?
Button navigates to signup pageComment on x.asper (bio)'s post “What are things you shoul...”
(6 votes)
Answer
- Izzy
  Posted 9 months ago. Direct link to Izzy's post “Especially with the high ...”
  Especially with the high living expenses of today, it can be hard to meet your needs.
  1. I think it is better to start small and save up all the spare change you can until it gets to be enough where you can deposit it into an account in a bank.
  2. Another thing you can try and do is reason with your boss or manager as to why you need or would benefit from a raise. Most bosses will reason with you and you can try to make a compromise.
  3. You can also try and negotiate your bills,e.g.:
  your electric bill
  house payment
  car payment
  etc.
  by talking to the moderator of your bills inside of the company to which you pay.
  Any more questions, just comment on mine!
  I hope this helps!
  - Izzy
  Comment on Izzy's post “Especially with the high ...”
  (7 votes)
sakibnazmus44
Posted a year ago. Direct link to sakibnazmus44's post “awesome, I am happy I hav...”
awesome, I am happy I have found out this at my 26
Button navigates to signup pageComment on sakibnazmus44's post “awesome, I am happy I hav...”
(7 votes)
Answer
ariyalsanders16
Posted a year ago. Direct link to ariyalsanders16's post “This is something that is...”
This is something that is good to have at the back of your head when your looking for a job.
Button navigates to signup pageComment on ariyalsanders16's post “This is something that is...”
(6 votes)
Answer
basto,gabriela
Posted a year ago. Direct link to basto,gabriela's post “How would you know how mu...”
How would you know how much money your spending a month and what its being spent on?
Button navigates to signup pageButton navigates to signup page
(3 votes)
Answer
- David Alexander
  Posted a year ago. Direct link to David Alexander's post “You either get an app for...”
  You either get an app for your phone, and enter every act of spending into it for a few months, or you carry a notebook and pen, and write everything down. In this way, you create a data base for use in future planning.
  Button navigates to signup page
  (6 votes)
Meenu Sharma
Posted a year ago. Direct link to Meenu Sharma's post “How can we reduce the tim...”
How can we reduce the time ( no of months) to save for rainy day faster?
Are we not saving for retirement in these months or other projects?
Button navigates to signup pageButton navigates to signup page
(1 vote)
Answer
- David Alexander
  Posted a year ago. Direct link to David Alexander's post “You spend less on other t...”
  You spend less on other things, or you reduce your retirement savings for a while, until you get the rainy day fund full.
  Comment on David Alexander's post “You spend less on other t...”
  (6 votes)
60462
Posted 2 months ago. Direct link to 60462's post “do i use a caculator”
do i use a caculator
Button navigates to signup pageButton navigates to signup page
(3 votes)
Answer
- David Alexander
  Posted 2 months ago. Direct link to David Alexander's post “Yes. This is not an exami...”
  Yes. This is not an examination. Use the calculator as much as you like.
  Button navigates to signup page
  (2 votes)
ankitp544
Posted 8 months ago. Direct link to ankitp544's post “I find it hard to create ...”
I find it hard to create my budget due to, too many liabilities, like my younger sibling's education, and my elder sister's marriage. How to manage your budget? if you have such heavy expenses. I can save only 10% at the most. Since I have so many loans to pay for.
Button navigates to signup pageButton navigates to signup page
(2 votes)
Answer
- William Wang
  Posted 8 months ago. Direct link to William Wang's post “If you have many expenses...”
  If you have many expenses, it will not be very easy to save — if you do, those amounts will likely be pretty minimal. Do what you can to pay for your loans and other expenses while saving a few dollars here and there, and your savings will add up over time.
  Comment on William Wang's post “If you have many expenses...”
  (3 votes)

Financial Literacy

Course: Financial Literacy > Unit 2

Emergency fund

Example

Practice

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