How Much Should You Save for an Emergency Fund?
An emergency fund is money set aside for surprises such as a job loss, a medical bill, or a car repair. Having one keeps an emergency from turning into new credit card debt. The right size depends on your situation, but there is a simple way to find your number.
Key points
- Add up essential monthly expenses: housing, food, utilities, insurance, transportation, and minimum debt payments.
- A common target is three to six months of those expenses.
- Aim higher if your income is irregular, you are the only earner, or you have dependents.
- Start with a smaller first goal, such as one month of expenses, then build from there.
- Keep the money in an accessible savings account, separate from everyday spending.
A worked example
If essential expenses are $3,000 a month, six months of coverage is $18,000. Starting with $1,500 saved and adding $300 a month in an account earning 4%, you would reach the goal in roughly 4 years and 2 months. Raising the contribution to $500 a month shortens that considerably.
Common mistakes
Many people wait until they can save the full amount before starting. A partial fund still helps, so begin now. Another mistake is investing the fund, which can lose value just when you need it.
Try the calculators
Emergency fund
Months until your savings reach your goal.
Savings goal
Find the monthly amount to reach a goal by a date.
Monthly budget
Check your spending against the 50/30/20 guideline.
Frequently asked questions
Should I save or pay off debt first?
Many planners suggest a small starter fund first, then paying down high-interest debt, then building the full fund.
Where should I keep it?
A high-yield savings account is common because the money stays accessible and earns interest.