Emergency Fund: How Much Do You Really Need?

An emergency fund is the foundation of financial security. Without one, a single unexpected expense can derail your finances.

How Much to Save

The standard advice is 3-6 months of essential expenses. If you have a stable job and multiple income sources, 3 months may suffice. If you are self-employed or have variable income, aim for 6-12 months.

What Counts as Expenses

Calculate your monthly essentials: rent or mortgage, utilities, groceries, insurance, minimum debt payments, and transportation. Do not include discretionary spending. Use our Savings Goal Planner to set a realistic target.

Where to Keep It

Keep your emergency fund in a high-yield savings account. It needs to be accessible within 1-2 business days but separate from your checking account to avoid temptation. Current high-yield savings rates are around 4-5%.

Building Your Fund

Start with a goal of $1,000 for immediate emergencies. Then work toward one month of expenses, then three, then six. Automate monthly transfers to make saving effortless.

When to Use It

An emergency fund is for genuine emergencies: job loss, medical bills, urgent car or home repairs. It is not for sales, vacations, or planned expenses. After using it, prioritize rebuilding it.