Build an Emergency Fund Saving

How Much of an Emergency Fund Do You Need?

Written by Rebecca Lake

A healthy emergency fund covers you in the event of a job loss, sudden illness or other financial catastrophe where you’d need to tap into some extra cash. Keeping your savings in a separate account and making your deposits automatic are the easiest ways to grow your balance. But how do you know when enough is enough?

Financial experts throw out lots of different figures on how big your emergency fund should be, but there’s no one-size-fits-all answer. How you answer the following questions can help you determine how big your emergency cushion needs to be.

What’s the bare minimum needed to cover my monthly expenses?

In the worst-case scenario, your emergency fund should be sufficient to pay all of your bills if something major happened like a job loss or an injury that prevented you from working for an extended period of time. Figuring out exactly what you’d need to get by for a month is a good starting point for settling on an emergency savings goal.

When you’re adding up your expenses, focus on those things that would need to be paid first. That includes your rent or mortgage payment, utility payments and insurance. From there, you can add on things like groceries and gas. If you have debt, you’d also want to factor in your payments for that but you wouldn’t include extras that you could do without, such as entertainment or dining out.

If your monthly nut isn’t that big and you could find ways to cut your costs even further if you needed to, then a smaller emergency fund may be sufficient. Three months’ worth of expenses is a good baseline and if you’re already living below your means it’s usually not too difficult to save that amount in a relatively short span of time.

About the author

Rebecca Lake

Rebecca Lake is a personal finance writer and blogger specializing in topics related to mortgages, retirement and business credit. Her work has appeared in a variety of outlets around the web, including Smart Asset and Money Crashers. You can find her on Twitter at @seemomwrite or her website,

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