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Emergency Fund proportional to Income, not Spending?

Oct 11, 2014 09:52AM EDT

What's the rationale for linking recommended Emergency Fund to Monthly Income? In the past I've heard recommendations to have a number of month's expenses, as that would be what one needs to cover with emergency savings in the event of a loss of income. If, for example, one only spends 30% of one's income, 6 months income as emergency savings seems like overkill as it covers 20 months' expenses.

Best Answer

HelloWallet Support Answer

Oct 13, 2014 04:44PM EDT
HelloWallet Support

Great question! We chose income as a proxy for expenses since many people spend almost all of their earnings each month. However, we are planning to revisit this and also intend to add something to account for two-income households that can live off all or most of a single income.

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