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How much of your paycheck should you save each month? Financial professionals often recommend putting at least 20% of your monthly take-home income into savings for future financial goals, such as buying a home and funding your retirement.

Exactly how much you should save each month, however, will depend on your income, current living expenses and financial obligations, as well as your goals. Here are some guidelines to help you decide how much of your income to stash in savings, plus tips on helping reach your goal.

How Much Should You Actually Be Saving Each Month?

There’s no one answer to “How much should I save each month?” Each person’s financial situation is different. Factors impacting how much you should save each month include income, expenses, debt, family size, and cost of living, among others. A commonly quoted bit of advice is to aim to save at least 20% of every paycheck.

The 50/30/20 Rule Is a Popular Starting Point

That 20% figure is part of the popular 50/30/20 budget rule. This technique says to put 50% of your take-home pay toward necessities (housing, utilities, minimum debt payments), 30% toward wants (travel, dining out, entertainment, and other fun purchases), and 20% toward savings and/or additional debt payments.

This budget can help you get on track for regular savings and is flexible enough to accommodate the fact that you may be dealing with debt. You might try a 50/30/20 savings calculator to help you do the math or work with a monthly budget template.

The “Pay Yourself First” Method Ensures You Always Save

Another strategy for saving is to use what’s known as the “pay yourself” method. This involves automatically transferring a sum of money into your savings account. This means the cash goes into savings before you use it to pay bills or go shopping.

In this way, you are prioritizing future goals (such as building an emergency fund, saving for a down payment, or funding a child’s education). Saving money becomes non-negotiable. You might schedule this kind of transfer from checking into savings just after your direct deposit paycheck hits. Online banking can make this a snap.

What Are Some Common Savings Goals You Should Plan For?

It can be difficult to know how much money you should save each month without having a sense of what you are saving for. Setting a few financial goals can also help motivate you to save, rather than spend all of your income.

Building an Emergency Fund for Unexpected Expenses Is Crucial

A major dental or car repair bill, the need for a new hot water heater, the unexpected loss of a job: These are fairly common occurrences that many people aren’t financially prepared for.

Experts advise that you have at least three to six months’ worth of living expenses stashed in an emergency fund for just these types of scenarios. By this measure, many Americans don’t have enough emergency savings, according to SoFi’s most recent “How People Bank Today” survey of 500 U.S. adults.

To start building an emergency fund, it’s wise to keep the money in a liquid form (a high-yield savings account can be a good option). For those who are the sole earner in a family or who have fluctuating incomes, a higher figure may be advisable. You might use an emergency fund calculator to help determine how much money to save to reach your goal. As you build your fund, this money can sit, earning interest, until a safety net of cash is needed. Then, if an emergency does occur, you can dip into the fund instead of relying on high-interest credit cards.

Saving for a Down Payment on a House Requires a Long-Term Plan

Building up cash for a down payment on a house can be part of the American dream for many. Steady savings over the long-term can be a wise move, and it typically takes discipline: This could be the largest sum you’ll ever save.

You might open up a dedicated savings account and automatically funnel funds into it. Many people aim for a 20% down payment to avoid private mortgage insurance (PMI), but there are loans available with as little as, say, 3% to 5% down. It can be wise to calculate how much you’ll need and how long you have to save that amount and then determine how much you need to sock away every month (a savings goal calculator or down payment calculator can help). Then you can budget appropriately and also deposit any windfalls into your savings.

Planning for Retirement Is One of the Most Important Financial Goals

Planning for retirement is typically another major financial undertaking. According to a recent Gallup poll, about six out of 10 Americans say they have a retirement savings plan. It’s a wise move to start planning and saving as soon as possible to allow time for your money to grow. There are various online calculators and other tools you can use to assess how much you will need for retirement, or you might choose to meet with a financial planner.

When you set out to save for retirement, you may want to take advantage of company matches offered in your workplace retirement plan by contributing the maximum amount the company matches.

After emergency savings, a down payment, and retirement, goals may start to look different from person to person. may want to save up to start a business, and yet another may be interested in college savings. Fifty-two percent of the respondents to SoFi’s survey said they are using their savings accounts to save for a specific goal.

Where Is the Best Place to Keep Your Monthly Savings?

The best account for building savings will depend on what you are saving for.

A High-Yield Savings Account Helps Your Money Grow Faster

If you are saving up for retirement, for example, you’ll likely want to use a designated retirement account, like a 401(k) or IRA, since they allow you to contribute pretax dollars (which can help lower your annual tax bill).

You may want to keep in mind, however, that the IRS (Internal Revenue Service) sets annual contribution limits to retirement funds.

For an emergency fund or other short-term savings goals (within three to five years), you may want to open a separate savings account, such as a high-yield savings account, money market account, or a checking and savings account. These savings vehicles typically offer more interest than a traditional savings account, yet allow you to easily access your money when you need it.

What Are Some Easy Ways You Can Boost Your Savings?

Below are some strategies that can help make it easier to start — and build — your monthly savings.

Automating Savings

One great way to make sure you stick to a money-saving plan is to automate savings, as referenced above. You may want to set up a recurring transfer from your checking into your savings account on the same day each month, perhaps the day after your paycheck clears. Even setting aside just a small amount of money each month now can, little by little, add up to a significant sum in the future.

Putting Spare Change to Work

There are apps that will automatically use roundups on any amount paid on a credit or debit card. They round your charge up to the next whole dollar amount and put that little bit of extra money into savings accounts or even invest it. This “pocket change” can add up over time.

Using Windfalls Wisely

If a lump sum of cash, such as a bonus or monetary gift, comes your way, you may want to consider funneling all or part of it right into savings.

Or, if you get a percentage raise on your salary, you might want to boost your automatic monthly transfer from your checking account to your savings account by the same percentage.

Reviewing Your Budget

If you feel like your budget is too tight to save anything at the end of the month, you may want to review your monthly and habitual expenses. You can do this by combing through your checking and credit card statements for the past few months. Or you may want to track your spending for a month or two. You can then come up with a list of spending categories and determine how much you are spending on average for each.

There are online tools that can help make this process easier — in fact, 23% of people use budgeting tools offered by their bank, SoFi’s survey found. And of the 20% of respondents who have used AI to help manage their finances, 31% have used automated budgeting suggestions.

Once you can see exactly where your money is going each month, you may find places where you can fairly easily cut back, such as getting rid of streaming subscriptions you rarely watch, quitting the gym and working out at home, or cooking more and getting take-out less often.

The Takeaway

The right amount to save each month will be unique to you and reflect such factors as your financial goals, how much you earn, and how much you spend each month on essential expenses.

One of the most important keys to saving is consistency. No matter how much of your income you choose to set aside each month, depositing small amounts regularly can build to a large sum over time to achieve your goals. Finding the right banking partner can also help you actualize your money aspirations.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

How much savings should I have by age 30?

A common guideline is to have your annual salary saved for retirement by age 30, with some sources suggesting a slightly lower target like 0.5x or 1x your salary for overall savings, which would include an emergency fund.

Is saving $500 a month considered good?

There’s no single amount of money saved every month that qualifies as good. Each person’s financial situation is unique. That said, consider the rule of saving 20% of your take-home pay. With this formula, saving $500 a month would equal $6,000 a year, which is 20% of a $30,000 annual take-home pay.

What should I do if I have debt and want to save?

It can be challenging to both save and pay off debt. Strategies can include budgeting wisely, paying the minimum on your debt while building an emergency fund, and then focusing on such debt payoff alternatives as the snowball and avalanche techniques or debt consolidation. Automating savings (aka paying yourself first) is another valuable method.

How is saving for retirement different from other savings goals?

Saving for retirement differs from other savings goals (such as for an emergency fund) since it’s a very long-term endeavor, can involve large sums of money, offers tax advantages, and carries legal protections.

What if I can’t afford to save 20% of my income right now?

It may not be possible to save 20% of your income due to such factors as high cost of living or high levels of debt. What is important is to start saving consistently, even if it’s a small amount, so that your money can grow over time and help you build long-term wealth.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOBNK-Q425-036

If you’re lucky enough to find yourself in possession of a bundle of cash that isn’t immediately needed to pay bills, you have some thinking to do. How to use that money? Whether it came your way via a work bonus, an inheritance, or an unexpected refund, you have the opportunity to put it to work for you in a variety of ways.

Instead of going on a shopping spree, you could deploy the funds to improve your financial situation and build wealth. Options include paying down debt, contributing to retirement goals, and beyond. Read on to learn the full story.

Before You Start: Make a Plan for Your Extra Cash

At some point, you may find some extra cash heading your way and wonder what to do with the spare money. Perhaps you get a bonus for wrangling a complicated project at work. Or you didn’t realize that you’d overpaid your taxes one year. Or maybe an inheritance comes your way.

When funds turn up that you weren’t expecting, it can be tempting to go shopping or book a last-minute vacation. But you might instead look at the money as a means to enrich your financial standing. (Or use most of it that way, and go shopping with a small amount of it.)

A windfall can be a once-in-a-blue-moon opportunity to pay off debt or plump up your emergency fund. It can help you boost your retirement savings or kick your savings for a future goal into high gear.

Yes, it takes discipline to put that money to work, but doing so can have a long-term positive impact on your finances and help with better money management.

Step 1: Build Your Financial Safety Net With an Emergency Fund

If your emergency fund is low (or nonexistent), you might use your new windfall of extra cash to build it up.

Having an emergency fund gives you a financial cushion, along with the sense of security that comes with knowing you can handle a financial set-back (such as a job loss, medical expenses, or costly car or home repair) without hardship.

Having this buffer can also help you avoid having to rely on credit cards for an unexpected expense and then falling into a negative spiral of high interest debt.

How Much to Save in an Emergency Fund

A general rule of thumb is to keep three to six months’ worth of monthly expenses in cash as an emergency fund. If, however, you are, say, the sole breadwinner in a family, you may want to aim higher. You might want to look at different scenarios using an emergency fund calculator.

Consider keeping your emergency fund in a separate high-yield savings account, such as a money market account, online saving account, or a checking and savings account. These options typically offer higher interest rates than a standard savings account, yet allow you to access the money when you need it.

id=”step-2-pay-down-high-interest-debt-like-credit-cards”>Step 2: Pay Down High-Interest Debt Like Credit Cards

If you carry any credit card or other high-interest debt, you might want to use your windfall to jumpstart a strategic debt payoff plan. While mortgage loans and car loans tend to offer lower interest rates since they’re secured by collateral, the same can’t be said of unsecured debts, such as credit card balances. Credit card debt can be especially hard to pay off, given that the current average interest rate is over 20%.

Strategies for Paying Down Debt

Here are two popular options for paying down debt:

•   The avalanche method involves ranking your debts by interest rate. You then put any extra money you have towards paying off the debt with the highest interest rate (while continuing to pay the minimum on other debts). After the balance with the highest interest rate has been completely paid off, you move on to the next highest interest-rate balance (again, putting as much money as you can toward it), and then move down the list until your debt is repaid.

•   With the snowball method, you focus on paying off your smallest debt first (while paying the minimum on your other debts). Once that balance is paid off, you take the funds you had previously allocated to your smallest debt and put them toward the next-smallest balance. This cycle repeats until all of your debt is repaid.

Using your extra cash to pay off debt has added benefits. You may build your credit score as your credit utilization ratio (the amount of available credit you’ve used vs. your credit limit) goes down.

In addition, once you clear your debt, you won’t have to budget for debt payments anymore, which is essentially getting extra cash all over again.

Step 3: Boost Your Retirement Savings

Here’s another idea for what to do with extra money. Rather than let it sit in your checking account, you might use it to grow your retirement accounts. There are a couple of options to consider here.

401(k) and Employer Match

Does your employer offer a 401(k) with matching contributions? If so, this can be a powerful tool to help you save for retirement.

Not only does a 401(k) help lower your taxes (since this money comes out of your salary before taxes are deducted), your employer’s matching contributions are essentially free money and can provide a nice boost to your retirement savings.

If you’re not currently taking full advantage of matching funds, you may want to adjust your contributions to help ensure you’re making the most of this benefit. And if a windfall comes your way, you may want to deposit it right into your account.

Start or Fund an IRA

What do you do if you don’t have a company plan or you’ve hit your contribution limit there? You might consider using your new influx of cash to open up (or add to) an individual retirement account (IRA).

While retirement may feel a long way off, starting early can be a smart idea, thanks to the magic of compound earnings (that’s when the money you invest earns interest/dividends, those earnings then get reinvested and also grow).

There is also a possible immediate financial benefit to investing in an IRA: Just as with a 401(k), your IRA contributions can possibly reduce your taxable income, which means that any money you put in this year can lower your tax bill for this year.

You’ll want to keep in mind, however, that the federal government places limitations on how much you can contribute each year to retirement funds.

Recommended: IRA vs. 401(k): What’s the Difference?

Step 4: Invest Beyond Retirement With a Brokerage Account

A little windfall can offer a nice opportunity to buy investments that can possibly help you create additional wealth over time.

For long-term financial goals (outside of retirement), you might consider opening up a brokerage account. This is an investment account that allows you to buy and sell investments like stocks, bonds, and funds like mutual funds and exchange-traded funds (ETFs).

A taxable brokerage account does not offer the same tax incentives as a 401(k) or an IRA but is much more flexible in terms of when the money can be accessed.

Though all investments come with some risk, generally the longer you keep your money invested, the better your odds of overcoming any down markets. Your investment gains can also grow exponentially over time as your earnings are compounded. Worth noting: Past performance doesn’t guarantee future return, and while your money may be insured against broker-dealer insolvency, it is not insured against loss.

While investing can seem intimidating, a financial planner can be a helpful resource to help you create an investment strategy that takes into consideration your goals and risk tolerance.

Step 5: Save for Major Life Goals

Still wondering what to do with extra money? If you already have a solid emergency fund and your retirement account is growing nicely, you may want to think about what large purchases you are hoping to make in the next few years. That could be buying a new car, or accruing a down payment for a home. A savings goal calculator can help you determine how much to save and for how long to reach your goal.

A lump sum of cash can be a great way to jumpstart saving for your goal or, if you’re already saving, to quickly beef up this fund.

Save for a Down Payment on a House

Owning one’s own home is a classic part of the American dream. To save for a down payment, you may want to open a dedicated high-yield savings account after researching which has the best interest rates and terms. Then, you could set up automatic transfers into it from your checking account after your paycheck is direct-deposited.

While saving a 20% or more down payment will help you avoid private mortgage insurance (PMI), that amount isn’t always possible. Some mortgages are available with 3% to 5% down, and first-time buyer assistance programs can provide extra help. Set a realistic timeline for saving; an online down payment calculator can help you do the math.

Save for a Child’s Education With a 529 Plan

If you have some extra money, you might consider putting it toward your child’s future education expenses. A 529 college savings plan is worth considering: It’s a tax-advantaged savings tool for education which allows earnings to grow tax-free. Withdrawals for qualified education expenses are also tax-free, offering a money-smart way to save for future schooling.

Step 6: Invest in Yourself Through Education or New Skills

Another option for extra money is to invest in yourself through education and new skills. This can turbocharge your career trajectory and earning potential. Depending on your particular interests, budget, and profession, you could go back to school for a degree, take an online course, attend workshops, or obtain certificates in different skill areas. Doing so can help you explore new horizons or deepen your competencies in an area you are already pursuing.

You can add money to a savings Vault account to earn interest as you research options and determine the best path forward.

The Takeaway

Wondering what to do with a lump sum of extra money is a good problem to have. Some options you might want to consider include: setting up an emergency fund, paying down high-interest debt, or putting the money into your retirement fund or another type of long-term investment.

If you are looking for a place to bank your funds for a future goal, compare account features, such as the annual percentage yield (APY) offered and fees assessed.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Should I pay off debt or invest my extra money first?

When deciding whether to pay off debt or invest extra money, it’s usually wise to pay off high-interest debt such as credit cards) first. Then, if you only have low-interest debt (say, a mortgage), investing can be a good step because investment returns can be greater than the debt’s interest rate.

What should I do if I only have an extra $100 a month?

If you have an extra $100 a month, it can be a smart move to build an emergency fund, pay off high-interest debt (like credit cards), or invest in, say, a Roth IRA to build your wealth.

Where is the best place to keep my emergency fund?

Many people find that a high-yield checking account is a good place to keep their emergency fund. This keeps your money liquid, meaning you can access it when needed, while also earning some interest.

How much of my extra money should I enjoy versus save?

It’s important to strike a balance between enjoying your money and saving it. You might try the 50/30/20 budget rule, which allocates 50% of take-home pay to essentials, 30% to wants (things you enjoy), and 20% to savings and additional debt payments.

What is the difference between saving and investing?

Saving is setting money aside money securely and accessibly, often to achieve short-term goals. Investing involves using money for long-term growth in such assets as stocks and bonds but with a higher level of risk.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOBNK-Q425-040

An emergency savings fund is a lump sum of cash set aside to cover any unanticipated expenses or financial emergencies that may come your way.

Besides offering peace of mind, an emergency fund can help save you from having to rely on high-interest debt options. These include credit cards or unsecured loans which can snowball. Not having rainy-day savings can also threaten to undermine your future security if you wind up tapping into retirement funds to get by.

What Is an Emergency Fund?

An emergency fund is essentially a savings fund earmarked for emergency expenses—aka unplanned expenses or financial emergencies. A major home repair, like a leaking roof, is an example of an unplanned expense that needs to be dealt with right away. Losing a job is an example of a financial emergency that can cause a lot of stress if you don’t have an emergency fund to dip into to pay for necessities and bills.

If someone doesn’t have an emergency fund and experiences financial difficulties, they may turn to high-interest debt. For instance, they may use credit cards or personal loans to cover expenses, which can lead to struggling to pay down the debt that’s left in its wake.

You may be wondering just how much to keep in an emergency fund. Financial experts often recommend having at least three to six months’ worth of basic living expenses set aside in an emergency fund. That can be a lofty goal considering that one recent study showed that about half of all Americans would struggle to come up with $400 in an emergency scenario. And in SoFi’s April 2024 Banking Survey of 500 U.S. adults, 45% of respondents said they have less than $500 set aside in an emergency fund. It’s wise not to be caught short and to prioritize saving an emergency fund.

Source: SoFi’s 2024 Banking Survey

Why Do You Need an Emergency Fund?

With all of the bills that a person typically has to pay, you may wonder, “Why should creating an emergency fund be a top priority?” Here’s why: An emergency fund can be a kind of self-funded insurance policy. Instead of paying an insurance company to back you up if something goes wrong, you’re paying yourself by setting aside these funds for the future. Building this cushion into your budget can be a vital step in better money management.

How you invest emergency funds is of course up to you, but keeping the money in a high-yield savings account typically gives you the liquidity you need while earning some interest.

Having this kind of financial safety net comes with a range of benefits. Below are some of the key perks of having an ample emergency fund.

Preventing You From Going into Debt

Yes, there may be other ways to quickly access cash to cover the cost of an emergency, such as credit cards, unsecured loans, home equity lines of credit, or pulling from other sayings, like retirement funds.

Preventing debt is one of the most important reasons to have an emergency fund.

But these options typically come with high interest fees or penalties. Though there are many reasons for having an emergency fund, preventing debt is among the most important and enticing.

Providing Peace of Mind

Here’s another reason why it is important to have an emergency fund: Living without a safety net and simply hoping to get by can cause you to stress. Thoughts about what would happen if you got hit with a large, unanticipated expense could keep you up at night.

Being prepared with an emergency fund, on the other hand, can give you a sense of confidence that you can tackle any of life’s unexpected events without experiencing financial hardship.

Providing Finances During Unemployment

Applying for unemployment benefits, if you are entitled to them, can help you afford some of your daily expenses. Unfortunately, these payments are generally not enough to cover your entire cost of living.

If you have an emergency fund, you can tap into it to cover the cost of everyday expenses — like utility bills, groceries, and insurance payments — while you’re unemployed.

Starting an emergency fund also gives you the freedom to leave a job you dislike, without having to secure a new job first. Sometimes this can be the best move if you are stuck in a toxic situation.

Making Better Financial Decisions

Having extra cash set aside in an emergency fund helps keep that money out of sight and out of mind. Having money out of your immediate reach can make you less likely to spend it on a whim, no matter how much you’d like to.

Also by having a separate emergency account, you’ll know exactly how much you have — and how much you may still need to save. This can be preferable to keeping a cash cushion in your checking account and hoping it will be enough. In fact, 77% of the SoFi survey respondents who have a savings account said they used it specifically for emergencies.

Recommended: Guide to Practicing Financial Self-Care

Emergency Fund Statistics

Curious about how much other people have in their emergency funds? Or what percentage of Americans actually have a rainy-day account? Here are some recent research numbers to know:

•   About 75% of people report having emergency savings.

•   46% have enough money to cover three months’ worth of expenses.

•   Just 19% of people in SoFi’s report said they have between $1,000 and $5,000 in emergency savings.

•   24% of people overall have no emergency savings at all.

•   37% of Americans said they couldn’t cover a $400 emergency expense, according to Empower data.

•   59% of U.S. survey respondents said they couldn’t cover a $1,000 emergency bill.

How Do You Build an Emergency Fund?

One of the basic steps of how to start a financial plan is saving for emergencies. Stashing money aside for a rainy day is a vital part of financial health.

The good news is that starting an emergency fund doesn’t have to be complicated. These tips can help you get your emergency fund off to a good start.

•   Set your savings target. The first step in building an emergency fund is deciding how much to save. The easiest way to do that is to add up your monthly expenses, then multiply that by the number of months you’d like to save (typically, at least three to six months). If the amount seems overwhelming, you can start smaller and aim to save $1,000 first, then build up your emergency fund from there.

•   Decide where to keep it. The next step is deciding where to hold your emergency savings. Opening a bank account online could be a good fit, since you can earn a competitive APY (annual percentage yield) on balances while maintaining convenient access to your money. You could also choose to open a traditional bank account and use its online banking features. Forty-eight percent of people say they use online banking daily, according to SoFi’s data.

•   Automate contributions. Once you set up an online bank account for your emergency fund, you can schedule automatic transfers from checking. This way, you can easily grow your emergency fund without having to worry about accidentally spending down that money.

One of the most frequently asked emergency fund questions is whether a savings account is really the best place to keep your savings. After all, you could put the money into a certificate of deposit (CD) account instead or invest it in the market. But there are issues with those options.

A CD is a time deposit, meaning you agree to leave your savings in the account for a set maturity period. If you need to withdraw money from a CD in an emergency before maturity, your bank may charge you an early withdrawal penalty.

So, should emergency funds be invested instead? Not so fast. Investing your emergency fund money in the stock market could help you to earn a higher rate of return compared to a savings account. But you’re also taking more risk with that money, since a downturn could reduce your investment’s value. Proceed with caution before taking this step.

How Long Does It Take to Grow an Emergency Fund?

Emergency funds don’t necessarily come together overnight. Saving after-tax dollars to equal six months’ worth of typical living expenses can take some work and time. Here’s an example to consider: If your monthly costs are $3,000, you would want to have between $9,000 and $18,000 set aside for an emergency, such as being laid-off.

•   If your goal is $9,000 and you can set aside $200 per month, that would take you 45 months, or almost four years, to accumulate the funds.

•   If you can put aside $300 a month, you’d hit your goal in 30 months, or two and a half years.

•   If you can stash $500 a month, you’d have $9,000 saved in one and a half years.

A terrific way to grow your emergency fund is to set up automatic transfers from your checking account into your rainy-day savings. That way, you won’t see the money sitting in your checking and feel as if it’s available to be spent.

Recommended: Online Emergency Fund Calculator

How Can You Grow It Faster?

You’ve just seen how gradually saving can build a cash cushion should an emergency hit. Here are some ways to save even faster:

•   Put a windfall into your emergency fund. This could be a tax refund, a bonus at work, or gift money from a relative perhaps.

•   Sell items you don’t need or use. If you have gently used clothing, electronics, jewelry, or furniture, you might sell it on a local site, such a Facebook group or Craigslist, or, if small in size, on eBay or Etsy.

•   Start a side hustle. One of the benefits of a side hustle is bringing in extra cash; it can also be a fun way to explore new directions, build your skills, and fill free time.

These techniques can help you ramp up your savings even faster and be prepared for an emergency that much sooner.

Prioritizing Your Emergency Fund When You Have Other Financial Obligations

Most of us have competing financial goals: paying down student debt or a credit card balance; accumulating enough money for a down payment on a house; saving for college for kids; and socking away money for retirement. In many cases, you’ll see variability in financial goals by age, but there are often several needs vying for your dollars at any given time.

Here’s advice on how to allocate funds:

•   Definitely start or continue saving towards your emergency fund. Even if you can only spare $25 per month right now, do it! It will get you on the road to hitting your goal and earning you compound interest. Otherwise, if an emergency were to strike, you’ll likely have to resort to credit cards or tapping any retirement savings, which probably involves a penalty.

•   Continue to pay down high-interest debt, like credit card debt. You want to get this kind of debt out of your life, given the interest rates can currently top 20%. You might explore balance transfer offers that let you pay no or very low interest for a period of time (say, 18 months) which can help you pay down your debt. Just make sure you understand the fees that are typically involved.

•   Steadily stick to your schedule for low-interest debt, which typically includes student loans and mortgages.

•   Fund your retirement savings as much as you can. As with an emergency fund, even a small amount will be worthwhile, especially with the benefit of compound interest. Make sure to contribute enough to take advantage of the company match if your employer offers that as part of a 401(k) plan; that is akin to free money.

The Takeaway

An emergency fund is an important financial goal. Once you’ve accrued at least three to six months’ worth of basic living expenses, you can feel more secure if a major unexpected expense pops up or job loss happens. It can be wise to store emergency funds in a high-yield savings account to deliver both liquidity and interest.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What is the purpose of an emergency fund?

An emergency fund is a financial safety net. It’s money set aside that you can use if you are hit with a big, urgent, unexpected bill (like a medical expense or car repair) or endure a loss of income. In these situations, an emergency fund can help you avoid using your credit cards and taking on high-interest debt or hurting your credit score by paying bills late. How to invest an emergency fund is up to you, but a high-interest savings account is one good, liquid option.

Can I use an emergency fund for a non-emergency expense?

Technically, you can use an emergency fund for a non-emergency expense. After all, it’s your money. But it’s not wise to do so and defeats the whole purpose of saving this cash. If you use your emergency funds to pay for a vacation or new clothes, then if a true emergency arises, you won’t be prepared.

How difficult is it to rebuild an emergency fund?

It can be difficult to rebuild an emergency fund, just as it was to accumulate the money in the first place. But even if it takes years to achieve your goal, it is worth it. Putting away money gradually for an emergency is an important step towards being financially fit.

More from the emergency fund series:

<

How to Build an Emergency Fund

Emergency Fund Calculator

Where to Keep an Emergency Fund

When to Use Your Emergency Fund

Should You Ever Invest Your Emergency Fund?

>

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOBNK-Q325-116

Setting up an emergency fund is an important step for financial security, but finding the cash can be tricky. Much as you might want to have a bundle of money waiting if you had a major medical bill due or endured a job loss, actually accruing an emergency fund may sometimes seem almost impossible. Monthly bills and expenses can siphon off your income, making it tough to save.

While it can be challenging, building an emergency fund can be done. It may take some time, but what’s important is to start saving and then keep it up, even in small amounts, to help protect your financial future.

What Is an Emergency Fund and Why Is It Important?

An emergency fund is a savings fund earmarked specifically for unanticipated expenses or financial emergencies that might crop up — such as job loss, major home repairs, or a medical procedure that results in a hefty bill. Financial professionals typically suggest having three to six month’s worth of income in an emergency fund.

An emergency fund is important because without this financial safety net, an individual might have to use high-interest credit cards or take out a loan to cover the emergency expense, which could result in having to pay down a significant amount of debt.

6 Steps to Building an Emergency Fund

Step 1. Set a Clear and Achievable Savings Goal

When it comes to the emergency fund amount you should have, most financial professionals recommend that you save three to six months’ worth of living expenses. Some people, however, may want to aim higher. If you are the sole provider for a family, have significant medical expenses, or are self-employed, you may want to allocate a higher amount, for example.

You can use an emergency fund calculator to help determine your savings target. Once you calculate that sum, you can divide it by 12 or 24 to get a one- or two-year savings plan for meeting the target.

The goal amount of your emergency fund may seem intimidating, but don’t let that discourage you. Even if you can only take a small amount ($25, say) from each paycheck as you save money from your salary, it will help make a difference.

Having some money in your bank account for emergencies is what matters.

Step 2. Choose the Right Account for Your Emergency Fund

The next important step is to get your emergency fund account set up. When choosing an account type, these are some considerations to keep in mind:

•  Because an emergency fund is like a rainy day fund — you spend it only when a specific unexpected event warrants it, such as a costly medical procedure — putting it in a separate dedicated account can be helpful. Otherwise, if you leave the funds in your regular savings account, you might be tempted to spend the money.

•  A savings account that could help your money make more money, such as a high-yield savings account, is one option to explore.These accounts can offer interest rates that are higher than those of standard savings accounts. And thanks to the power of compounding interest, your money may grow faster.

•  Consider using savings vaults. These are essentially extensions of your savings account that let you organize your money into “buckets” and earmark it for specific goals, without having to set up a new account. That way, if you have a high-yield account, you can still earn the same competitive interest rate on your money and save for multiple goals at once, including an emergency fund.

Step 3. Find Room in Your Budget to Start Saving

If even a two-year timeframe for building your emergency fund amount feels intimidating, don’t worry. The important thing in terms of how to build an emergency fund is to begin saving and stick with it. If you only have a little bit of money to add per month, save that much. Good start!

Also, consider growing your savings by depositing windfall money in your emergency fund. Perhaps you’ll receive a tax refund, a bonus at work, a rebate, or other unexpected source of funds. Put that into your emergency account to help it grow.

Step 4. Automate Your Savings With Direct Deposit

Depositing money into your emergency savings consistently can help your fund grow. And letting technology do the work for you can make it practically effortless. You could set up automatic savings transfers into your emergency fund just after you get paid, for instance. Or, if you have a side hustle, you might decide to automatically deposit 10% or 20% of those earnings into your emergency fund.

Not only will you reap the satisfaction of saving, if the money isn’t sitting in your checking account, you won’t be tempted to spend it.

Step 5. Start Tracking Your Expenses and Spending

If it feels like you just don’t have any cash available to put toward an emergency fund, consider ways to manage your money better and cut your budget a bit.

Perhaps you could eat out a bit less often, save on streaming services, shop for basics at warehouse clubs, or find other ways to trim back. Once you lower or eliminate some costs, you can put that extra money toward your emergency fund.

One thing to be alert for is “lifestyle creep.” This happens when, as you begin to earn more, you also spend more. In other words, as your income grows, so do your expenses, meaning you don’t build wealth. If you get a raise at work and then lease an expensive car, you may struggle to increase your savings.

However, if your spending stays in check, you can put a portion of your increased earnings toward your emergency savings account.

Step 6. Know When to Use Your Fund and How to Replenish It

Of course, you only want to tap your emergency savings account for a necessary and urgent expense.

An example of a financial emergency is a major home repair such as a roof that suddenly starts leaking. It could also be a car repair, like a blown tire that needs to be fixed so you can drive to work, a medical emergency that results in a hefty bill, or a job loss.

After you use your savings to help pay for an emergency, remember to replenish your emergency fund. That can ensure that you are prepared for the next unexpected expense that might pop up, which could help you achieve financial security. Otherwise, you could wind up drawing down your savings and have nothing left when needed.

To replenish your account, determine your new savings goal and start setting aside funds to help you reach it. Deposit any windfalls into your account, cut back on whatever expenses you can and put the resulting savings into your fund, or take on a weekend job to earn some extra income to replenish your emergency stash.

How Long Does It Take to Grow an Emergency Fund?

Emergency funds don’t necessarily come together overnight. Saving after-tax dollars to equal six months’ worth of typical living expenses can take some work and time. Here’s an example to consider: If your monthly costs are $3,000, you would want to have between $9,000 and $18,000 set aside for an emergency, such as being laid-off.

•   If your goal is $9,000 and you can set aside $200 per month, that would take you 45 months, or almost four years, to accumulate the funds.

•   If you can put aside $300 a month, you’d hit your goal in 30 months, or two and a half years.

•   If you can stash $500 a month, you’d have $9,000 saved in one and a half years.

A terrific way to grow your emergency fund is to set up automatic transfers from your checking account into your rainy-day savings. That way, you won’t see the money sitting in your checking and feel as if it’s available to be spent.

Next, we’ll take a look at how to accelerate saving for an emergency fund.

How Can You Grow It Faster?

You’ve just seen how gradually saving can build a cash cushion should an emergency hit. Here are some ways to save even faster:

•   Put a windfall into your emergency fund. This could be a tax refund, a bonus at work, or gift money from a relative perhaps.

•   Sell items you don’t need or use. If you have gently used clothing, electronics, jewelry, or furniture, you might sell it on a local site, such a Facebook group or Craigslist, or, if small in size, on eBay or Etsy.

•   Start a side hustle. One of the benefits of a side hustle is bringing in extra cash; it can also be a fun way to explore new directions, build your skills, and fill free time.

These techniques can help you ramp up your savings even faster and be prepared for an emergency that much sooner.

How to Start an Emergency Fund on a Low Income

Even when money is tight, you can still build an emergency fund. It may require some extra time and dedication, but every small step you take to grow your emergency fund amount can make a difference. Consider these tips to help reach your goal:

•   Go over your budget carefully. Look for any expenses you could reduce and direct that money toward your emergency fund instead. For example, pack lunch for work and bring it with you every day. Then use your “lunch money” to help bolster your emergency savings.

•   Get on a regular saving schedule. For example, you could automate the transfer of a small amount of money (say, $20) every payday into your emergency fund.

•   Take advantage of “found” money. Use any windfall, such as a tax refund, a rebate, or a birthday gift, to help build your account.

How to Build an Emergency Fund in College

Creating an emergency fund as a college student gives you a cushion to deal with unexpected expenses you might face while in school, such as your laptop dying or your car breaking down. Methods to build up your emergency savings as a student can include:

•  Use student discounts. Taking advantage of the deals you get as a student can help you maximize your savings at stores, restaurants, and other retailers. Put the money you save into your emergency account.

•  Start a side hustle. You could get a weekend gig walking dogs, for instance. Or if you knit or make ceramics, try selling your creations on Etsy. There is no limit to what you can try. The benefit of a side hustle is that you’ll make some extra cash that you can put towards your emergency fund.

•  Gamify your savings. You can give yourself fun challenges that help you save cash. For example, you might challenge yourself not to buy any fancy takeout coffee for a month and put the amount saved in your emergency fund account. The next month, you might skip yoga classes and instead practice at home. Again, deposit the extra cash into your emergency account.

How to Stay Motivated While Saving

Now that you know how to start an emergency fund, the next step is to stick with your savings goals. These tips for staying motivated could help.

•  Find a buddy. Pair up with a friend or relative who is also trying to save, and support one another through the ups and downs of the process.

•  Give yourself a pat on the back. Recognize that saving can be hard and that you may not hit your goal every month. But every time you put money in your emergency fund, you are doing something positive for your financial health. Be proud of yourself, and give yourself a little treat now and then to celebrate your accomplishment.

•  Use available tools. Many financial institutions, as well as other companies, offer ways to automate, track, and build your savings. See what is offered that could help you save more easily.

The Takeaway

Starting and keeping an emergency fund can be an important step in achieving financial security. By keeping at least three to six months’ worth of living expenses in an interest-bearing account, you will have a cash cushion if you should hit one of life’s unexpected speedbumps. Automating the process, directing any windfalls to the account, and replenishing it after withdrawing funds are all important steps in the process.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What expenses qualify as an actual emergency?

Expenses that qualify as actual emergencies that you could use your emergency fund savings to pay for include a major home repair, such as a damaged or leaking roof; a large medical bill as the result of a sudden medical procedure; car repairs necessary for your vehicle to operate properly; and daily living expenses you have to cover after a job loss, such as rent, utility bills, insurance, groceries, and so on.

Where is the best place to keep my emergency fund money?

Where you choose to keep your emergency fund money is up to you, but one option is a high-yield savings account that offers rates higher than the rate of a standard savings account. This could potentially help your money earn more money. Plus keeping your emergency fund in a bank account keeps it liquid so that it’s easier to access when you need it.

Should I invest my emergency fund in the stock market?

Where you decide to put your emergency fund is a personal decision, however, many financial professionals advise against investing it in the stock market. That’s because the market can be volatile and there is the risk of losing money. Also, when an emergency strikes, you often need money quickly. Money that’s invested in the stock market is typically not liquid and may take time to access. For instance, you might need to sell stocks in order to get your cash.

How is an emergency fund different from regular savings?

An emergency fund is different from regular savings because the money is earmarked specifically for an emergency that might arise, such as an unexpected medical bill. Ideally, emergency fund savings aren’t used for anything other than emergencies, while regular savings may be used for a variety of other purposes, such as a down payment on a house, purchasing a car, or taking a vacation.

You may want to keep your emergency fund in a separate savings account so that you aren’t tempted to spend it on non-emergencies.

More from the emergency fund series:

<

Emergency Fund: What It Is and Why It’s Important

Emergency Fund Calculator

Where to Keep an Emergency Fund

When to Use Your Emergency Fund

Should You Ever Invest Your Emergency Fund?

>

Photo credit: iStock/SergeyChayko

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOBNK-Q325-097

Life is unpredictable, and an emergency fund acts as your financial safety net. Whether it’s covering unexpected medical expenses or getting through a sudden job loss, an emergency fund gives you peace of mind and prevents you from relying on high-interest credit cards or loans during a crisis.

Experts generally recommend saving at least three to six months’ worth of living expenses for emergencies, which can add up to a sizable sum. With this much money sitting in an account, it’s natural to wonder: Should you invest your emergency fund to help it grow faster?

The answer is generally, no. Emergency funds should be readily available and liquid — meaning you can access them quickly without losing value. Riskier investments like stocks, mutual funds, or real estate, typically do not fit that profile. However, there are safe places where you can store your emergency fund while still earning a modest return.

Should You Invest Your Emergency Fund?

It can be tempting to put your emergency fund to work. After all, if you’ve saved $10,000 or more, why not grow it in the stock market or tuck it into your retirement account? On the surface, it feels like a smart financial move.

However, your emergency fund serves a very different purpose from your investment accounts. Investments are meant to build wealth over time, while an emergency fund exists to protect you in the short term. That means safety and accessibility may matter more than potential growth.

Think of it this way: If you put $10,000 into a savings account, you’ll have that $10,000 several months from now. If you put that $10,000 in a brokerage account and invest in stocks, it might grow to $12,000 in a few months, but it could just as easily drop to $8,000 (or possibly even less) right when you need it most.

On top of that, certain investment accounts come with restrictions, taxes, and/or penalties that make it harder — and more expensive — to access your money quickly.

This doesn’t mean your emergency fund has to sit in a checking account earning little to no interest. The key is to find a balance: a place where your money remains safe, liquid, and accessible, while earning at least some return.

Recommended: Emergency Fund Calculator

The Risks of Investing an Emergency Fund

While investing can build wealth in other areas of your financial plan, it can undermine the purpose of your emergency fund. Here are the biggest risks you face when putting those savings into investments.

It Might Take You Longer to Get Your Money

Emergencies, by definition, require quick action. If your car breaks down or a pipe in your home bursts, you’ll likely need funds immediately. Some investments, however, are not designed for instant access. Stocks and mutual funds, for example, must be sold before you can access cash, and it can take a couple of business days for the transaction to settle. The longer it takes to access your money, the less effective your emergency fund becomes.

You Could Risk Losing Money

The stock market can be volatile. If you need to access your emergency fund during a market downturn, you could be forced to sell your investments at a loss. Even relatively stable assets like bonds or certain mutual funds can lose value when interest rates rise or market conditions shift. This makes them unreliable for something as crucial as an emergency fund.

You could also face taxes and penalties. Withdrawals from taxable accounts may trigger capital gains taxes, and pulling money early from retirement accounts often comes with penalties. What’s supposed to be a cushion could quickly turn into a financial headache.

Considerations for Storing an Emergency Fund

Instead of chasing returns, you’re usually better off putting your emergency fund in an account that is safe, yet not stagnant. The best places to keep an emergency fund allow you to:

Access Your Funds Easily

The most important feature of an emergency fund is liquidity. You need to be able to access the money quickly, ideally within minutes or hours, not two to three business days, or more. This means avoiding accounts where you might face delay, fees, or penalties for withdrawals.

Earn Potentials Returns on Your Money

While safety comes first, that doesn’t mean your emergency fund has to sit idle. Traditional savings accounts often earn a relatively low interest rate, but newer options such as high-yield savings accounts and money market accounts generally offer much better returns without sacrificing accessibility.

Even if the interest rate seems small compared to investment returns, earning 3.00% to 4.50% APY (Annual Percentage Yield) on your emergency fund can help combat inflation and ensure your money grows slowly over time instead of losing purchasing power.

3 Options for Keeping an Emergency Fund

If you want your emergency fund to be both safe and productive, here are three common options worth considering.

High-Yield Savings Account

A high-yield savings account (HYSA) can be a good choice for an emergency fund. Many HYSAs are offered by online banks, which generally have lower overhead costs and can pass those savings on to customers through higher interest rates and fewer (or no) fees.

HYSAs generally pay interest rates far above traditional savings accounts — often several times the national average. In addition, funds are typically FDIC-insured and accessible anytime.

Money Market Account

A money market account (MMA) blends features of savings and checking accounts. They typically offer higher interest rates than standard savings accounts while providing some of the conveniences of a checking account, such as checks or a debit card. Just keep in mind that some MMAs require high minimum balances and may charge monthly fees if balance requirements aren’t met.

Certificates of Deposit

Certificates of Deposit (CDs) offer a guaranteed return without risking your money, and rates are typically higher than traditional savings accounts. The tradeoff is that your funds are locked up for a specific term (which can range from a few months to several years), and early withdrawals typically trigger a penalty. However, there are two ways to make CDs work for your emergency fund:

•   CD ladders: With this strategy, you spread your emergency fund across multiple CDs with staggered maturity dates (e.g., 3 months, 6 months, 12 months). This way, a portion of your funds becomes available regularly while still earning higher interest.

•   No-penalty CDs: Some banks offer CDs that allow you to withdraw funds early without penalties. These can be a good compromise between higher interest and accessibility. Just keep in mind that no-penalty CD rates tend to be lower than traditional CDs with similar term lengths.

While CDs generally shouldn’t hold your entire emergency fund, they can work for a portion of it if you want to maximize returns without significant risk.

The Takeaway

An emergency fund isn’t meant to be an investment but, rather, a safety net. Putting your emergency savings in volatile investments like stocks or real estate can leave you vulnerable just when you need money the most.

That said, you don’t have to leave your emergency fund in a traditional savings account that may earn lower rates. High-yield savings accounts, money market accounts, and certain CDs can offer the perfect balance of safety, accessibility, and growth.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Is it wise to invest your emergency fund?

Generally, it’s not wise to invest your emergency fund in risky assets like stocks, mutual funds, or real estate. The purpose of this fund is immediate accessibility and preservation of capital, not growth. Investments can fluctuate, and if you need cash during a downturn, you might be forced to sell at a loss. A safer option is keeping your fund in a high-yield savings account or money market account, where it earns more modest interest but remains secure and easily accessible.

How much of my emergency fund should be liquid?

Ideally, your entire emergency fund should be liquid, or at least the majority of it. Emergencies often require immediate cash access, so keeping funds in a savings account, checking account, or money market account is generally best.

If you have a larger emergency fund — say, more than six months’ living expenses — you might keep a small portion in short-term certificates of deposit (CDs). However, it’s generally a good idea to keep at least three to six months of essential expenses fully liquid and easily accessible without penalties.

What should an emergency fund not be used for?

An emergency fund should not be used for planned expenses, vacations, shopping, or investments. It exists specifically for unexpected, urgent financial needs such as medical bills, car repairs, or a sudden job loss. Using it for non-emergencies undermines its purpose and can leave you vulnerable when a real crisis comes up.

More from the emergency fund series:

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Emergency Fund: What It Is and Why It’s Important

How Much Money Should Be in Your Emergency Fund?

How to Build an Emergency Fund

Emergency Fund Calculator

Where to Keep an Emergency Fund

When to Use Your Emergency Fund

>

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
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