How much in cash or emergency savings do you really need?! Find out with this simple 5 questions quiz.
Cash and emergency savings guidelines generally recommend 6 – 12 months equivalents of expenses. Variations of this advice would be to use 6 – 12 months equivalent of income, or some may advocate as low as 3 months equivalent.
Life isn’t as straightforward as a text-book though. How much in cash and emergency savings you should hold is different for each individual’s needs. Below, we look at 5 important questions that will help you to make this important decision.
Quiz Instructions: For each question, select the closest answer and sum up your total score.
Q1: What stage in life are you in?
- Dependent on parents/others: 1
- Working part-time: 5
- Working full-time: 10
- Retired: 50
Extra Question: Do you have dependents (a.k.a.
little monsters dependent children)?
- Yes: 20
- No: 10
Q2: Is your career and income stable?
- Yes, I am a superstar!: 8
- Mostly yes. I’m doing ok: 10
- No, I live in fear of retrenchments, recessions, and evil bosses: 20
Q3: Do you have alternate cash sources?
Alternate cash sources: cash out from your home loan equity, insurance policies, FAMA bank, etc
- Yes: 10
- No: 15
Q4: How important is holding cash for you?
- YES!! It is very important to hold cash [hokkien: ta-po gina bei sai bo lui]: 20
- Yes it is important: 10
- Who needs cash?! YOLO!!: 5
Q5: Are you waiting for investment opportunities?
- Yes (playing with fingers intertwined), I am the type who likes to hold cash, ready to invest when markets collapse and there are bargains: 20
- No, I invest regularly with the funds that I have: 10
- No, I don’t invest because investing is dangerous: 20
How did you score?
The amount of cash that you need very much depends on a mixture of your stage in life, financial dependencies, the stability and availability of your income/cash sources, and your perceptions on holding cash whether it is to feel safe or to take advantage of future investment opportunities. Your total score will give you a general indicative level of emergency savings in terms of monthly expenses equivalent. This will allow you to take action to increase (or decrease) your cash and emergency savings.
|Total Score||Cash/Emergency Savings|
|49 & below||0.5 months|
|50 – 54||1 month|
|55 – 59||1.5 months|
|60 – 69||3 months|
|70 – 79||6 months|
|80 – 84||12 months (1 year)|
|85 – 89||18 months (1.5 years)|
|90 – 94||24 months (2 years)|
|95 – 99||36 months (3 years)|
|100 & above||60 months (5 years)|
Download: MyPF.my Cash and Emergency Savings Quiz (excel version)
Note: E&OE. For general information sharing purposes only. Please refer to a personal finances advisor for more detailed individual analysis.
How much cash do you hold and why?