Joelle wants to have an emergency fund to cover 6 months of her expenses. Her monthly gross pay is $4,000 and her monthly expenses are $2,000. If she plans to save 10% of her gross pay each month, how long will it take her to build her emergency fund?

Question

Responses

3 months
3 months

9 months
9 months

24 months
24 months

30 months
30 months

Answer 1

To determine how long it will take Joelle to build her emergency fund, we first need to calculate how much she needs and how much she plans to save each month.

1. Calculate the total amount needed for the emergency fund:

   • Joelle wants to cover 6 months of expenses.
   • Monthly expenses = $2,000
   • Emergency fund needed = 6 months × $2,000/month = $12,000

2. Calculate how much she saves each month:

   • Joelle plans to save 10% of her gross pay each month.
   • Monthly gross pay = $4,000
   • Monthly savings = 10% of $4,000 = 0.10 × $4,000 = $400

3. Calculate how long it will take to save for the emergency fund:

   • Total emergency fund needed = $12,000
   • Monthly savings = $400
   • Number of months to save = Total emergency fund / Monthly savings = $12,000 / $400 = 30 months

Therefore, it will take Joelle 30 months to build her emergency fund.