How To Set Up Your Emergency Savings

How can you secure yourself financially?

Let’s continue the financial journey and learn more about emergency savings. Last week, I gave you an overview for your journey to financial freedom. In this post you will learn why you need emergency savings, how you can calculate how much you need and get tips on how to save for emergencies.

Main points

  • Save the amount you need to cover your living expenses for at least three, preferably six to 12 months.
  • Add savings for unexpected bills.
  • Keep the savings liquid and safe.
  • Don’t spend your emergency savings on unnecessary items.

What are emergency savings for?

It’s in the name: they are for financial emergencies. A financial emergency can occur when you lose your only or main source of income or unexpectedly have to pay a high bill. Emergency savings can help you pay your bills and keep your household running. You should never spend emergency savings on items you don’t need. You never know when a financial emergency will occur.

How much should you save?

The exact amount depends on your location and personal financial situation. But you should always have enough money at hand to bridge six months to a year of living expenses. If you’re not able to save that much, start with three months and then keep saving.

How do I calculate the amount I need?

Write down all the monthly expenses you have. This includes rent, electricity, water,insurance, cable, phone and car bills. These costs should be easy to find out. Then you need to calculate how much you spend on groceries and other household items, as well as clothes etc. Write down how much you spend on what for at least three months and calculate the average.

The average plus your monthly expenses are the amount you need. If there are any unnecessary spendings you wouldn’t need in a financial emergency, cut them out.

If your country has social benefits to help you out, get information if you’re eligible. Let’s take Germany as an example. If you were employed for at least 12 consecutive months within the last two years, you will get unemployment benefits. These equal 60% of your net income. So when you calculate how much you need, you can take this money into consideration and save a little less.

Emergency Savings for unexpected bills

If you have emergency savings for your living expenses, you should set up another category of emergency savings. This money should be kept aside for unexpected bills. An unexpected bill can occur, when you need to repair your car or get another big ticket item, that you couldn’t pay for from your monthly income.

There are different recommendations for the amount, depending on the size of your family and general costs of your country. Aim at saving 2.000 to 4.000 € for emergency savings. Adjust the amount to your individual situation.


Monthly expenses 
Rent,water and gas included400€
Other Shopping50€
Saving goal2.055€ mimimun
end goal: 4.110€ to 8.220€
Unexpected bills3.000€
Total saving goal11.220€ for 12 months
Here’s an example of a fictional one person household for you.

Where should I keep my emergency savings?

When it comes to emergency savings, the most important aspect is liquidity. It doesn’t matter if you get any return for your emergency savings. Once the emergency occurs, you need to access the money quickly. Therefore you should insure the liquidity.

So don’t invest your emergency savings into anything that requires maturity or selling. Don’t keep it under your mattress either. That’s not a safe place. It should be easily accessible and safe, like on a regular savings account.

What’s your experience with emergency savings? Do you have any saving tips?

Continue your financial journey by learning how to save for big ticket items!

Can’t wait? I recommend this book ( link is affiliated):

3 thoughts on “How To Set Up Your Emergency Savings”

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