How to Calculate How Much Money Should Be in Your Emergency Fund

Any good emergency fund consists of expenses that continue on during an emergency. While there are a few different scenarios in determining when we can tap into this savings, there is only one way to calculate it and it is pretty simple.

1. Housing - rent or mortgage, it also includes electricity, trash, water and those sort of bills. Netflix is not here, and if times are tough, neither is WiFi.

2. Food - groceries. Don't put your restaurant spending money or brewery adventures in your emergency fund calculations. This is how much money you need to put food on the table for your family. And if members of the house are still working, this includes packing a lunch (no going out to eat at work either).

3. Transportation - let's be realistic, even in a crisis you will need gas to go buy your groceries or to pick up kids from school. Maybe you take the bus, include your bus passes here instead. You aren't accounting for saving for a car in this fund or a repair that you want to get done in the future.

A proper emergency fund consists of 6 months of savings for the above items. Add up expenses for each month, times it by six and there you go! This money should live in a savings account that you have quick and easy access to. You are not trying to gain interest on this money, you are getting prepared for an unfortunate time in your life.