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How Much Money Should Be in Your Emergency Fund?

By Janet Siroto · October 19, 2022 · 12 minute read

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How Much Money Should Be in Your Emergency Fund?

Having an emergency fund is a good safety net if you get hit with an unexpected car repair bill or get laid off. You know you’ll have cash available. But how much should you actually have in the bank? Most experts recommend that you have at least three to six months’ worth of living expenses, but that can vary on factors like your age, your health, how many dependents you have, and your cost of living.

An emergency fund is one of the best ways to make sure you’re not relying on credit cards to make ends meet if a worst-case situation were to crop up. Just knowing it’s there might even help you sleep better at night. To help you determine how much you need in the bank, read on. You’ll learn about how to tuck away the right amount, and answer such questions as:

•   What is an emergency fund?

•   What is the issue with not having an emergency fund?

•   How can I start saving for an emergency fund?

•   How much should an emergency fund be?

•   What are the factors that influence how much I should have in an emergency fund?

•   How can I build my emergency fund?

What Is an Emergency Fund?

An emergency fund is money set aside in case an urgent and unexpected expense comes your way. This could be a medical or dental bill, a car repair, or travel to visit a family member who is ill or injured. The money can also be used in situations where a person is laid off or their hours are reduced and they don’t have enough cash to make ends meet.

Financial experts typically recommend that people prioritize saving an emergency fund and have at least three to six months’ worth of basic living expenses covered. In some cases, you may want to stash away more.

Also worth noting: An emergency fund needs to be liquid and accessible. When an emergency strikes, you want to be able to access your money quickly, without penalties for making a withdrawal. This is why a high-yield savings account can be a good choice. Your money will earn some interest and be available when you need it, unlike, say, a certificate of deposit (CD), which ties up your money for a period of time.

Also, an emergency fund should be in an account that is insured by either the Federal Deposit Insurance Corporation (FDIC) or NCUA, the National Credit Union Administration. Due to its volatility, the market is not a good place for an emergency fund.

How Much Should You Have in an Emergency Fund?

As briefly mentioned above, most experts recommend that you have at least three to six months’ worth of basic living expenses in the bank. This means that if you were, say, injured and unable to work or is you lost your job, you could keep going for a few or several months.

So let’s say you typically spend $4,000 a month on housing, food, utilities, and debt payments. In that case, the answer to “Is $20,000 enough for an emergency fund?” would be yes. That sum would see you through five months if you needed it.

However, if your monthly living expenses are $10,000, then $20,000 would only last two months. Instead, $30,000 would be enough for an emergency fund in your situation. Some experts would say even more, up to $60,000, would be a better figure.

This amount can seem daunting, but remember, you aren’t expected to have it set aside in one lump sum. You will save up to reach this goal. And you are not alone in needed time to build an emergency fund. Barely half of Americans surveyed could pay an unexpected bill of $1,000 (you’ll learn more on that in a moment).

Also know that if, due to other expenses or life circumstances, you can’t accumulate that amount in savings, something (anything) is better than nothing. Don’t feel defeated and not save at all. If you can put away $1,000 over the course of a year, do it.

How to Calculate Your Emergency Fund Amount

If you’re convinced of the value of an emergency fund, it’s time to drill down on just how much to save. Figuring out how much money should be in your emergency fund is a fundamental step in building your financial plan for the future. Here are some ways to calculate your goal and achieve it:

•   Conventional wisdom says you should have between three months and six months’ worth of living expenses set aside for an emergency. To calculate your expenses, you might create a line-item budget. It will also give you a clearer view of how much money you have coming in and going out. Once you’ve determined what your take-home pay is, calculate all your monthly necessary expenses including rent or a mortgage, insurance, healthcare, utilities, phone, car, etc. And of course, factor in student loan or credit card debt.

   After you tally all your expenses, deduct that amount from your take-home pay and then see what is left. This is where you’ll need to figure out how much you can realistically set aside each week or pay period for your emergency fund. Aim to accrue your goal amount in a year, if possible.

   Let’s say you’re a recent grad whose minimum monthlies total $2,000. In this case, $10K is a good emergency fund. It could float you if it took you, say, five months to find a job.

•   Another method for saving is to look at your insurance deductibles for your medical, dental, household, and car policies. Although it’s no fun, imagine having some kind of accident that triggered your needing to pay a few or even all of those deductibles at once. This is especially daunting if you have a high deductible health plan (HDHP); if you need to cover that amount all of a sudden, you could wind up with debt. Make sure you have enough in the bank to cover that amount.

•   You might also see what unemployment would pay you per month if you were to lose your job. See how that compares to your living expenses, calculate the shortfall monthly, and work towards saving, say, six times that amount.

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Factors That Determine How Much to Save for an Emergency Fund

When considering how much an emergency fund should be, three to six months’ worth of living expenses is a good baseline. That said, there are certain situations that may require a bit more saving, as in at least six months’ worth and possibly a year’s worth. Also, when you are thinking “How much emergency savings should I have?” know that the figure will likely vary, person by person. Even if you have an identical twin, your goals will probably differ. Here are some factors to consider.


If you or a member of your immediate family has a medical condition, you probably will want to save a bit more in your emergency fund. You might have additional doctors’ or lab expenses. The price of prescription drugs could increase. Or you could be dealing with a situation where your insurance doesn’t pay or takes a long time to do so. An emergency fund can be your lifeline.

Also, if you have a medical condition that could have you out of work for a period of time, your emergency fund could help you pay the bills.

Amount of Debt

If you have more than minimal debt in your life, it can be a good thing to have an extra cushion of money in your emergency fund. Let’s say you have student loan debt, car payments, a mortgage, and credit card debt, as many Americans do. An unexpected expense or loss of work could mean that all of those payments can’t be met. That can trigger considerably late charges, possibly non-sufficient funds or overdraft charges as well, and can also lower your credit score. Having money in the bank can keep you afloat in an emergency situation.

Cost of Living

It’s no secret that inflation has been extremely high lately. Many people’s raises at work don’t come close to offsetting the uptick they have seen in the price of groceries, gas, heating, and more. An emergency fund can help make ends meet if a big bill hits amidst this situation.

Also, if you live in an area with a high cost of living, you may be more vulnerable and need emergency funds. For instance, in major metropolitan areas, rents have recently seen a sizable uptick. A significant rent increase could mean it’s a challenge to afford your monthly bills until you recalibrate. An emergency fund could help if a huge rent hike comes your way.

Recommended: What Is Cost of Living?

Job Security

While there are no guarantees in life or in work, some jobs are more secure than others. If you have a very specialized skill set that would make it hard to quickly find another job should you need one, save a bit more. Also, if you are a freelance or seasonal worker, your income may be less predictable than those with salary jobs. You may want to make sure you have the higher end of the range for emergency funds.

Children or Dependents

If you have children or dependents, you know how important it is to keep all the plates spinning and pay for their needs. This level of responsibility means it would likely be wise to save extra. You are also more vulnerable to having emergency expenses if you have dependents as well: A child could have more medical or dental bills than you expected, or an elder could be sick and you might have to take unpaid leave to care for them.

Having Financial Support

Some of us have a support network that could lend us money or otherwise help out in case of an emergency. For others, there is no one in their immediate family or friends group that could provide a loan or gift if an urgent expense were to crop up. If you are more of the “all by myself” type in this regard, that’s another reason to add a bit more to an emergency fund.

Your Age

Typically, your saving goals vary by age, and so should the amount in your emergency fund. If you are retired or nearing retirement age, you probably should set aside more for an emergency fund. As you age, medical expenses tend to rise, and you might also be on a fixed income. These variables make having more money available a wise move.

The Issues With Not Having an Emergency Fund

When it comes to having an emergency fund, Americans struggle with what would appear to be a simple, commonsensical idea.

The average person does not put enough in an emergency fund. In fact, 56% of Americans said they could not cover an unexpected $1,000 emergency expense, according to a recent survey. That means they would likely have to either put the amount on their credit cards (which is a form of high-interest debt which can be hard to pay off), borrow, or sell something to cover the cost.

But you could be faced with a much more serious financial hardship than $1,000. Or you might endure a long-term stretch of unemployment or a medical misfortune that could have a nasty impact on your finances.

In circumstances like these, an inability to pay your bills could potentially damage your credit score and keep you in debt for years to come.

Tips for Building an Emergency Fund

If you’ve figured out how much emergency savings you should have (or at least a ballpark figure), it’s time to start saving! Here are some pointers to help you bulk up your account and know where to keep it.

•   Set up automatic deductions. Let’s say you have figured out how much per paycheck you can put into your emergency fund. Whether it’s $25 or $250 or more, know that any amount will get you on a path to meeting your goal and having peace of mind. If you have a linked savings account, set up payday automatic transfers so the cash is whisked into your rainy day fund. You don’t want it sitting in your checking account, tempting you to spend it.

•   If you don’t have a savings account you can use for your emergency fund, it’s likely a good idea to open one. A high-yield one can help you earn a bit of interest. Whether you choose an online vs. traditional bank is up to you, though online ones tend to offer higher interest rates. (Incidentally, some people keep their emergency fund as a mix of checking and savings accounts; the choice is yours, as long as that money is sitting in case it’s needed.)

•   Consider growing your savings by depositing windfall money in your emergency fund. Perhaps you’ll receive a tax refund, a bonus, a rebate, or other unexpected source of funds. It can go into your account.

•   If you are having a hard time finding room in your budget to enrich your emergency fund, see if you can challenge yourself to make temporary, rotating budget cuts (going to the movies one month, buying clothes the next). Then put the saved money into your account. Or take up a side hustle, and put your earnings into the emergency fund.

Recommended: How to Manage Your Money Better

The Takeaway

Having an emergency fund is an important element of your financial fitness. It’s a cushion of money socked away, to be used if you have unexpected, urgent bills or face a loss of income. The amount you should save will vary depending on a variety of personal factors, such as whether or not you have dependents and how easily you could find a new job if laid off. Whatever the amount you want to have in your emergency fund may be, it’s important to start saving, little by little, so you can enjoy the peace of mind that this account can bring.

Wondering where to start and grow your emergency fund? SoFi has a simple, accessible, and top-notch solution. If you open a bank account online for your emergency fund with us, with direct deposit you’ll earn a competitive APY and pay no account fees. That can help your money increase faster.

If you’re ready to start saving for your emergency fund, see how SoFi Checking and Savings can help.


Can you have too much in an emergency fund?

It’s wise to have at least three to six months’ worth of basic living expenses in an emergency fund. Depending on your specific situation, you might even want twice that. However, since emergency funds are usually held in savings accounts, which don’t earn all that much interest, you might look elsewhere if you have more than that sum to invest and grow.

Do you need an emergency fund if you are rich?

Everyone needs an emergency fund. People who are rich may have bigger expenses and bills than those who have less money, so they definitely want funds accessible if an emergency were to strike. What’s more, a wealthy person may have their money in investments like real estate, meaning it’s not liquid nor easily tapped, which is all the more reason to have some cash in the bank.

Can you have financial freedom without an emergency fund?

For most people, having an emergency fund is part of financial freedom. When you know you have enough cash to manage a worst-case scenario, it takes away a layer of worry. Many financial experts recommend having at least three to six months’ worth of living expenses in the bank and available.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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