Emergency Fund Readiness Test

Three months or twelve?

The usual advice says three to six months of expenses. That is far too blunt. A salaried employee with employer health cover and no dependants is often fine at three months. A freelancer with lumpy income, an ageing parent to support, and no insurance should be aiming at twelve. This test calculates your own target instead of somebody else's average.

What counts as a fixed expense

Only what you cannot switch off next month: food, rent or mortgage, utilities, transport to work, school fees, regular medication, and existing loan payments. Streaming subscriptions, daily coffee, and holidays do not count, because all of them stop the moment things go wrong.

Where the money should sit

Somewhere you can reach within hours, separate from your day-to-day account, and stable in value. That rules out stocks, crypto, and property. High returns are not the goal here; instant availability is.

If the target looks impossible

Do not chase the full number. Collect one month of expenses first. That alone removes most of the situations that would otherwise force you to borrow. Raise it in steps after that.