The formula to calculate the emergency fund is:
\[ \text{Emergency Fund} = \text{Monthly Expense} \times \text{Number of Months} \]
This calculator helps you determine the amount of emergency fund you need based on your monthly expenses and the number of months you want to cover.
Let's take Cindy as an example:
Step 1: Determine the amount of money you usually spend on your monthly expenses:
For Cindy, her monthly expense is $2,500.
Step 2: Determine the number of months of savings you desired:
Cindy would like to have 6 months of savings.
Step 3: Calculate the emergency fund amount needed:
\[ \text{Emergency Fund} = 2,500 \times 6 = 15,000 \]
Thus, the emergency fund needed for Cindy is $15,000.