How your target is worked out
An emergency fund covers your essential costs if your income stops or a large unexpected bill arrives. Its size depends on what you need to live on each month and how secure your income is.
- Essential costs. Rent or bond, food, transport, insurance, school fees, utilities and minimum debt repayments. Leave out spending you could stop in an emergency.
- Months of cover. The calculator suggests three months if you earn a regular salary, and six months if you are self-employed or earn commission. You can change the number.
- Target. Your essential monthly costs times the months of cover.
- Time to reach it. The amount still needed, divided by what you can save each month.
Example: salaried and self-employed
Lindiwe's essential costs are R18 000 a month. As a salaried employee, she aims for three months of cover, a target of R54 000. If she worked for herself, six months of cover would mean R108 000.
She already has R20 000 saved and can put away R2 000 a month, so she will reach her R54 000 target in 17 months.
Common questions
Where should I keep my emergency fund?
Somewhere safe that you can reach quickly, such as a savings account or money market account. Avoid investments that can drop in value or that lock your money in for a fixed term.
Should I build an emergency fund before paying off debt?
Many people start with a small fund while they pay down debt, so an unexpected cost does not go back on a credit card, then build the full fund once the debt is cleared.
Can I use my two-pot savings as an emergency fund?
You can withdraw from your savings pot, but the withdrawal is taxed at your marginal rate and reduces your retirement savings. A separate emergency fund avoids both.