What’s an Emergency Fund and How Much is Enough?

Last Updated on August 13, 2021

Emergency funds are financial safety nets. They refer to money that’s kept liquid for expenses and unforeseen situations, especially unemployment.

Liquidity refers to money that is easily accessible like cash that you can get out of the ATM, fixed deposits or from investments with little to no downsides when you need to cash out early.

While there isn’t a magic number that would be suitable for everyone, there is a rule of thumb you can follow in terms of how much needs to be in your emergency fund.


Here are some important factors to help determine the size of your emergency fund:

1. How stable is your job?

If you work for a sizable company with a healthy cash flow like an MNC or if you work in a government job, you can consider your job mostly stable. If you are self employed, working in a startup or in a company with a history of hiring and firing quickly, your job would be classified as relatively unstable. The more unstable your source of income, the bigger your emergency fund needs to be.

2. How employable are you?

This factor refers to how easily you can get a new job. There are two parts to this. Firstly, how desired are your skills in the market? Are many companies looking for the skills and experience you have?

Secondly, what are the unemployment rates and duration of getting a new job in your country? For instance in Singapore it took about 2 months for people to get a new job in 2018. While in Malaysia, 48.4% of active job seekers took up to 3 months to find a job.

Here are some unemployment rates in Asia’s major cities to keep in mind: Indonesia at 5.01% as at Mar/19

Malaysia at 3.30% as at Jul/19

Hong Kong at 2.90% as at Aug/19

Singapore at 2.20% as at Jun/19

Thailand at 1.00% as at Aug/19

India at 6.00% as at Dec/18

Source of charts: https://tradingeconomics.com/country-list/unemployment-rate?continent=asia

Thankfully, the overall unemployment rates in these countries are close or within the healthy zone of 4%-5%, indicating healthy economies.

3. How much do you like your job?

If you’re in an unbearable job either due to a demanding boss, workplace bullying, or company values that go against your personal values, then you might want to start preparing a larger emergency fund.

Since you know you’re likely to leave, you should focus on saving more funds to tide you through the transition. If your emergency fund is running low, you may want to think twice before handing in your resignation.

4. How much do you spend each month?

The amount you need each month depends on your lifestyle. These expenses include your essential monthly recurring bills like transportation, utilities, expenses on food, drinks and groceries.

If you don’t know how much that amount is, it might be a good time to start keeping track. The Planner Bee app can help you to track these expenses automatically.

If you are self-employed, be sure to include your business costs. For instance, if you run a startup and are self-funded, chances are your personal expenses are intertwined with the business expenses, so be sure to add in costs like rent and salaries.

5. Do you have any ongoing loans or is anyone relying on you financially?

Both of these expenses can’t be put on hold. For instance, your mortgage loan and personal credit line payments need to be added into your emergency fund. These repayments aren’t going to be paused when you’re unemployed.

Likewise, you can’t put your parents, spouse or children’s expenses on hold when you’re unemployed. Be sure to consider situations of unemployment due to health emergencies of your dependents. The more dependents you have, the more likely you are to take time off work to take care of them.

When you are done reflecting on each of these factors, be sure to write down your expected expenses and duration of unemployment.


Let our emergency fund calculator help you determine the size of your emergency fund.

You may also use this formula to decide on the size of your emergency fund:

Size of fund = (Monthly basic personal expenses + loan repayments + monthly expenses for dependents ) x expected longest period of unemployment in months


While interest rates in Banks stay low, you could look at alternatives here to keep your emergency fund growing.

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