Question

Jane and bill collins have total take-home pay of $5,250 a month. their monthly expenses total $4,600. calculate the minimum amount this couple needs to establish an emergency fund.

Answer 1

The bare minimum should be 15,800 dollars while it could save up to 31,600 fora more robust emergency fund

Step-by-step explanation:

The emergency fund should be saving in a highly liquid position for the amount between three and six months’ worth of expenses. The liquidity is important as if a burden occurs the couple has a few months of additional expenses cover.

In this case as the monthly expenses are 4,600 the minimum emercgency fund sghould be three months of these expenses:

4,600 x 3 months = 15,800 dollars

while a most safety amount would be around 6 month:

4,600 x 6 months = 31,600 dollars