Question

If the Potinsky household spends ​$37 comma 300 annually on all living expenses and​ long-term debt, calculate the amount recommended for an emergency fund. How might household circumstances​ (e.g., wage earners in the​ household, available​ credit, and type and stability of​ employment) affect this​ decision?

Answer 1

Answer:

$9,249 for three months, $18,498 for six months.

Explanation:

Experts recommend that an emergency fund should include 3 to 6 months of cash to provide for living expenses.

The Potinsky household spends $37,000 annually, therefore, it spends $3,083 monthly ($37,000 / 12).

For a three-month emergency fund = $3,083 x 3

                                                           = $9,249

For a six-month emergency fund = $3,083 x 6

                                                       = $18,498