Projects
The emergency fund: how much, where, and in what order
It is the first thing to build, before any project and before any investment. And it is almost always the one people put off.
Three months of what, exactly
The rule everyone repeats says « three to six months ». It is almost always misread: it means three months of unavoidable spending, not three months of salary.
The difference is enormous. On an income of 4,500 CHF with 2,600 CHF of fixed costs, the target is not 13,500 but 7,800. The first number puts you off; the second one gets built.
| Rent and bills | 1,500.— |
| Health cover | 380.— |
| Groceries | 450.— |
| Transport, phone | 170.— |
| One unavoidable month | 2,500.— |
| Target (3 months) | 7,500.— |
In what order
This is the question that always comes back: pay off debt first, or save first? The order that holds:
- One month of spending set aside. This is the bare minimum. Without it, the smallest surprise turns into credit.
- Expensive debt, above 8% interest. Consumer credit, overdraft, credit card. No investment earns as much as that interest costs you.
- The rest of the emergency fund, up to three months. Only now do you top the reserve up.
- Projects and investments. The pension, the trip, the flat. Not before.
Why one month first: with no reserve at all, an unexpected bill sends you back into debt, and you start from zero again. That first month set aside is what stops the circle closing.
Where to keep it
- In a separate account, but reachable. A savings account at the same bank is enough. The point is that it doesn't mix with your current account, not that it's hard to get at.
- Not in the stock market. An emergency fund is needed precisely on the days the markets are down. It has to be worth tomorrow what it is worth today.
- Not locked away. A pension plan is not an emergency fund: you cannot touch it.
How much per month
The amount matters less than the regularity. 150 a month gets you to 7,500 CHF in a little over four years; 300 a month in two. What fails is the 800 a month kept up for three months and then abandoned.
If you follow the 50/30/20 rule, the emergency fund is the first destination of the 20%, before anything else.
Common questions
How much should an emergency fund hold?
Three months of unavoidable spending, not three months of salary. Add up rent, insurance, groceries and transport: that is the figure to multiply by three.
Should I pay off debt before saving?
Set one month of spending aside first, then clear debt above 8% interest, then top the reserve up. Without that first month, the smallest surprise sends you back to credit.
Where should I keep my emergency fund?
In a separate but reachable savings account. Not in the stock market and not in a locked-in pension: it has to be available immediately and worth tomorrow what it is worth today.
Is six months better than three?
If your income is irregular or your job unstable, yes. On a fixed salary with a decent safety net, three months is usually enough.
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The 50/30/20 rule, explained simply
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