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Emergency Fund Calculator

Emergency Fund Simulator

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What is an emergency fund?

You may have heard the expression “keeping money under the mattress” to prepare for unexpected events. Although the idea has evolved, the purpose remains the same. Today, this safety reserve is known as an emergency fund, and its accessibility is just as crucial as it was in the past.

An emergency fund is a financial buffer created to cover unexpected situations that could disrupt your financial stability—such as job loss, medical emergencies, or urgent repairs. It also helps you avoid relying on loans or high-interest debt during times of crisis.

When should you use an emergency fund?

An emergency fund should be used strictly for unexpected and urgent expenses that cannot be covered by your regular monthly budget. Examples include:

  • Medical emergencies: Health-related expenses not covered by insurance.
  • Unexpected repairs: Urgent home or vehicle repairs essential for safety or daily life.
  • Job loss or income reduction: Maintaining financial stability while you search for new opportunities or adjust your budget.

How many months of expenses should you save?

The ideal size of an emergency fund varies depending on your employment type and income stability. General guidelines include:

  • Government or Tenured Employees: Due to higher job stability, save the equivalent of 3 months of fixed expenses.
  • Salaried Employees (Private Sector): For those subject to layoffs or income variations, save 6 months of fixed expenses.
  • Freelancers / Self-Employed Professionals: Due to income volatility, save 12 months of fixed expenses.

How to calculate your emergency fund?

To determine your emergency fund target:

  • Identify your fixed monthly expenses: Include essential costs such as housing, food, utilities, transportation, education, and healthcare.
  • Multiply your monthly fixed expenses by the recommended number of months:
    • Civil Servant: × 3.
    • Salaried/Corporate: × 6.
    • Freelancer/Self-Employed: × 12.

Example:
If your monthly fixed expenses total $3,000 and you are a salaried employee, your recommended fund is:
$3,000 × 6 = $18,000

Where should you keep your emergency fund?

Your emergency fund must be stored in a place that offers safety, daily liquidity, and instant access—but not literally under the mattress.

Ideally, the fund should combine security, accessibility, and modest returns. Recommended options include:

  • Poupança: Segurança com liquidez diária, mas rendimento geralmente baixo.
  • Money Market Accounts / Certificates of Deposit (CDs): Often provide higher yields than traditional savings accounts; CDs may have withdrawal penalties.
  • Low-Risk Bonds: Typically tied to government benchmarks and designed to preserve capital with low volatility.

When should you use spend your emergency fund?

You should withdraw from your emergency fund only in situations involving urgent and unexpected needs, such as:

  • Medical emergencies: Immediate health-related expenses.
  • Essential repairs: Necessary repairs to ensure safety and functionality.
  • Loss of income: Covering expenses while you reassess your finances or search for employment.

When should you NOT use your emergency fund?

Avoid using your emergency reserve for predictable or non-essential expenses, such as:

  • Vacations: These should be planned and funded separately.
  • Luxury purchases: Non-essential items should not compromise your financial safety cushion.
  • Speculative investments: High-volatility assets are inappropriate for emergency funds.

Preserving your emergency fund is fundamental to maintaining financial security during unforeseen situations and avoiding unnecessary debt.

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