Savings: Does the right amount depend mainly on your housing?
Hello, Quentin here. The right amount of savings depends on your housing budget, but also on how stable your income is and what other essential expenses you have.
Rent or a mortgage payment is due every month, while owning a home can also involve costly repairs. The goal is to build an emergency fund that suits your life, not to aim for a one-size-fits-all figure.
Good habits to adopt
- Calculate your essential monthly expenses: housing, food, energy, insurance, and transport.
- Work out how much of your budget goes on housing: add your rent or mortgage payment to your housing costs.
- Choose an initial target: three to six months of essential expenses is a guideline you can adjust.
- Add a buffer to suit your situation if your income varies, you have dependents, or your home needs repairs.
- Set up a regular transfer, even a small one, based on what you can realistically save.
To refine your target, you can read this guide to the realistic amount to aim for in an emergency fund and these tips for automating your monthly savings.
Housing changes the calculation, but it isn’t the only factor
Housing is often the biggest fixed expense in a budget. The larger its share, the more important it is to check that your emergency fund could cover essential bills if your income drops or an unexpected expense arises.
But being a renter doesn’t necessarily mean you need less savings. Rent is still due even after a loss of income. Conversely, a homeowner without a mortgage may have lower monthly expenses, but still needs to be prepared for a broken boiler or a leak.
The right approach, then, is to look at the expenses you really can’t avoid, not just whether you rent or own. Housing accounts for much of the amount you’ll need to cover, but job security and family responsibilities matter too.
Renter or homeowner: the risks are different
| Situation | Include in your calculation | What to watch out for |
|---|---|---|
| Renter | Rent, housing costs, energy, and insurance | Plan to keep paying rent if your income drops |
| Homeowner with a mortgage | Mortgage payment, condo fees, insurance, and bills | Keep a buffer for repairs and unexpected expenses |
| Homeowner without a mortgage | Ongoing costs, taxes, energy, and maintenance | Don’t confuse having no mortgage payment with having no expenses |
A homeowner can also split their savings into two pots: an emergency fund for household emergencies and a home maintenance budget for foreseeable repairs. That way, replacing a water heater won’t use up the entire amount set aside for a loss of income.
How much should you aim to save based on your monthly expenses?
A common guideline is to set aside the equivalent of three to six months of essential expenses. The calculation is based on expenses, not salary: if you earn €3,000 but your household can get by on €2,000, use that second figure as your starting point.
An employee with a stable income and few expenses can start with around three months’ worth. For a self-employed person, a household relying on a single salary, or a family with high fixed expenses, aiming for six months—or sometimes more—can provide a useful buffer.
| Essential monthly expenses | Three-month guideline | Six-month guideline |
|---|---|---|
| €1,500 | €4,500 | €9,000 |
| €2,000 | €6,000 | €12,000 |
| €2,500 | €7,500 | €15,000 |
These amounts are guidelines, not instructions that apply equally to everyone. If you can quickly rebuild your emergency fund because you have a high savings capacity, you may sometimes choose a lower target. If your income is irregular or your housing costs are high, a larger buffer may be more prudent.
A real-life example: two homes, two different emergency funds
Imagine Léa, a renter whose essential expenses come to €1,800 a month. An emergency fund covering three to six months would amount to around €5,400 to €10,800.
Samir is paying off a mortgage and spends €2,400 a month on his household’s essential needs. His guideline would be closer to €7,200 to €14,400, and he could add a separate amount for repairs he would be responsible for as a homeowner.
The difference mainly comes down to the level of expenses and the risks to cover, not a rule that automatically requires all homeowners to save more.
Build an emergency fund suited to your housing situation in three steps
- Add up your essential expenses. List your rent or mortgage payment, bills, food, insurance, transport, and unavoidable family expenses. Leave out leisure and purchases you could temporarily put on hold.
- Set a target based on your situation. Start with three months if your income is steady and your expenses are easy to reduce. Aim closer to six months if your job is uncertain, you’re self-employed, or your household relies on a single income.
- Keep the money accessible and reassess your target. Regulated savings accounts can hold the portion you may need quickly. Review your target after moving, a mortgage payment increase, the birth of a child, or a change in your employment situation.
Avoid keeping all your savings in a checking account, but don’t try to maximize returns at the expense of easy access either. The priority for this fund is still security and quick access to your money.
When should you adjust the amount in your emergency fund?
Moving to a more expensive home, an increase in your mortgage payment, or the arrival of a child can change your monthly expenses, so it’s worth recalculating your target. The same applies if you become self-employed or your household loses one of its sources of income.
Conversely, if your emergency fund is well above the amount you need and your situation is stable, you can give the surplus a purpose: a property purchase, planned renovations, or a longer-term investment. This isn’t about reducing your safety net, but about avoiding the needless accumulation of money that could go toward another goal.
An emergency fund is there to be used when a real setback occurs. After making a withdrawal, rebuild it gradually with transfers that fit your budget, without putting pressure on your day-to-day expenses.
Does the amount of savings depend mainly on housing?
Housing often accounts for a large share of essential expenses, but the amount also depends on income stability, family circumstances, and other expenses.
How much should I set aside if I’m paying off a mortgage?
Add your mortgage payment to your other essential expenses, then generally aim for three to six months of that total. A separate fund for repairs may also be useful.
Does a renter need an emergency fund?
Yes. Rent remains an expense you need to cover if your income drops. Renting doesn’t replace the need for an accessible emergency fund.
Should I include renovations in my emergency fund?
Urgent repairs may warrant a buffer, especially if you own your home. For planned renovations, it’s better to build separate savings to preserve your emergency fund.
Thanks for reading! Feel free to share your thoughts in the comments. — Quentin
