How Much Money Should You Have in Your Emergency Fund?

Quick Answer

The general rule of thumb is to keep three to six months’ worth of basic essentials stashed in your emergency fund. But how much you need to feel financially secure may differ.

Woman drinking from a mug and reading financial papers.

Everyone experiences the occasional financial emergency, and it can be as psychologically rocking as it is financially damaging if you're not prepared. An emergency fund is savings you set aside now so you're able to cope with bad times that could arise in the future. It can cover unexpected expenses, or support you if your income takes a hit.

While you hope you'll never have to use the money in your emergency fund, you'll be grateful you saved it if you do. But how much do you need to keep in your emergency fund? While the answer ultimately comes down to your personal financial situation, many experts recommend socking away between three to six months' worth of basic expenses. Here's how to find your savings goal number, plus where to stash your funds.

How Much Emergency Savings Do You Need?

How much emergency savings you need depends on your personal financial situation, including your income stability, your expenses and the needs of your dependents. There are some general rules of thumb you can apply to come up with a savings goal that works for you.

First, many experts recommend setting aside enough money to cover three to six months' worth of basic living expenses. That's only the essentials: rent or mortgage payments, bills, basic groceries, child care and the like.

But you might choose to save more than that in some circumstances. For example, if you're a freelancer, contractor or someone whose income varies from month to month, you might aim higher. The same could be true if you're the sole earner for multiple dependents.

But if saving multiple months' worth of basic expenses sounds overwhelming, start with a savings goal that works for you. Aiming to put $1,000 or even $500 in emergency savings can be a strong jumping-off point.

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How to Calculate How Much to Put in Your Emergency Fund

To calculate how much to put in your emergency fund, you'll need to know your baseline, necessary expenses.

Start by going through your bank account and credit card statements. Looking back over several months, tally up your spending on bare-bones essentials only. Here are some things to include:

  • Your monthly rent or mortgage payment
  • Utilities and other bills
  • Basic food and toiletries
  • Child care
  • Transportation, such as gasoline or bus fare
  • Health care and medical bills
  • Essential pet care and veterinary bills
  • Minimum monthly payments on your credit card and loan payments

To find a good average for your non-negotiable spending, be sure to look back over at least three months. Come up with a sum for each expense. Then, add those months up and divide by the number of months you reviewed to find your average monthly bare-bones spending.

Last, multiply your average essential monthly spending by the number of months you want in your fund.

Emergency Fund Savings Goal Example

Let's say you want to save four months' worth of essentials in your fund.

  1. Review your bank statements. Look at the past three months' spending on essentials like rent, food, your car payment and bills. For this example, let's say your expenses were $2,800 one month, $3,300 the next month and $2,900 in the third month.
  2. Find the average amount of your monthly expenses. Add your expenses from the past three months to get $9,000. Then, divide by three (the number of months you reviewed) to find your average monthly spending: $9,000 / 3 = $3,000.
  3. Multiply your average monthly expenses by four. With an average monthly spending of $3,000 and a desire to save four months' worth of expenses in your emergency fund, your savings goal would be $3,000 x 4 = $12,000.

This is just an example, and your income, expenses and number of months covered in your emergency fund will vary. If your income is inconsistent, you may want to average your expenses over a longer period of time, such as six months to a year. Be sure to also account for infrequent expenses such as tax payments and car registration.

Best Places to Keep Your Emergency Fund

The best place to keep your emergency fund is somewhere that you can easily access it when you need it, and where it will earn some interest. One strong choice is a high-yield savings account, where you'll have good liquidity but still earn more interest than the average savings account.

Another option is to put your emergency fund in a money market account. A money market account earns interest, similar to a traditional savings account. It also comes with the ability to use a limited number of check and debit card transactions each month, which can make it convenient to use.

To ensure you're funding your emergency savings goal consistently, set up automatic transfers from checking into savings each payday. Come up with a weekly or biweekly savings amount that works for you.

Let your money grow in your high-yield savings account or money market account so that it's there for you should you ever need it in an emergency.

The Bottom Line

Building an emergency fund is foundational to achieving financial security. That money is there to turn what could otherwise be a worst case scenario into a manageable crisis. For example, a job loss or a large repair bill are painful no matter what—but being able to survive without relying on borrowing can help soften the blow.