How long does it take to save a month’s worth of expenses as your emergency fund?

I was reading through my daily reading list today and I came across some good articles which really helped me learn something on how to save emergency funds. It really came out to me as an eye opener!

Every finance advisor today advises us that we should keep aside three to six months’ worth of expenses for emergency. But very less number of people end up saving that kind of emergency fund.



What’s the reason that rest of the people couldn’t do it?

Answer is very simple to this question, cause they save very less. Suppose you are saving just 5% of money from your whole income, that means you are spending 95% of your money in your expenses. So we’ll check how much time it actually takes to save only one month’s emergency fund.
By a simple formula, which I got from an article:



So you’ll be able to save a single month’s worth expense in 95/5 = 19 Months!  Yes More than a year and a half for just a single month’s worth of emergency fund.

That’s a bad news, obviously. But there is a flip side to this situation. If we just increase our monthly saving to 10% the time needed to save the money for a month comes down drastically to 9 Months only. An exponential drop! Just Imagine, you saved 50% for 2 months so you’ll be able to get that 1 month’s emergency fund in just 2 Months!!

So the bottom line is we need to save money a little more than we usually do, if we want to save some good amount of emergency funds. How to seriously save money, you can get some help on that here. Rob Berger (doughroller.net) has explained it very well.

Here’s another link for a great article I found in Morning Star’s yesterday’s newsletter, 5 Steps to Build an Emergency Fund. Great Article.


Hope you enjoy today’s post and start saving more towards a great emergency fund goal! Good luck.

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