September 2nd, 2013

How Much Should You Really Save in Your Emergency Fund?

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how much should you really save in your emergency fund

**Today’s guest post is contributed by Abby.**


You’ve probably heard that your emergency fund should contain about three to six months’ worth of expenses. At least, that’s what most of the financial gurus say.

But there’s a big difference between three months’ worth of expenses and six months’ worth of expenses. So which end of the spectrum do you fall on? Or should you actually save more or less?

Like other rules of thumb for your money, this one is flexible, and you should consider your own unique financial situation when setting an emergency fund savings goal.

So how much should you actually save in your emergency fund? After you think through this list of considerations, you can set a goal that’s right for you:

Your Job

Are you a freelancer, or are you steadily employed? Is your company financially stable? Do your paychecks vary, or are they the same each month? How long might it take you to find a new job if you lost yours?

Basically, the more stable your job and steady your income, the less you need in your emergency fund.

If you’re a freelancer who’s always hustling for the next client, you should have a relatively large emergency fund. But if you’re unlikely to lose your steady, salaried job, you may be able to get by with a smaller emergency fund.

Also, do some research in your career field. How many job openings are there in your area of expertise? The easier it would be for you to find a new job, if necessary, the less you’ll need in your emergency fund.

Yes, we all learned in the recession that there’s no such thing as a 100% secure job or career field, but some jobs are more reliable than others.

Your Other Income Streams

If your spouse also works, chances aren’t likely that you’ll both lose your jobs at once. So run some numbers to see how far the smaller of your two incomes could take you. If the smaller income could pay most of your essential monthly bills, you could scale back your emergency fund goal a bit.

Whether you’re married or single, you might have other income streams or potential income streams to look at, as well.

Say you’re running a side business right now. Maybe it’s not making much money, but could it make more if you turned it into a full-time gig (either because you decide to, or because you lose your day job)? If your side business is making good money or has solid potential, you may not need as much in your emergency fund.

One more income stream to consider: rental properties. If you’re currently maintaining one or more rental properties, you’ll actually need more money in your emergency fund than you would otherwise.

Your emergency fund has to include enough cash to cover unexpected maintenance for both your own home and your rental properties. So even though rentals represent another income stream, they’ll increase your emergency fund goal rather than decreasing it.

Your Family Situation

Whether your family has two incomes or not, you need to look at your family situation when setting your savings goal.

If you’re single with no intention of marrying or having kids in the near future, you can probably get by on a slimmer emergency fund. It can be easier to cut expenses as a single person, and you only have one person’s potential medical emergencies to worry about.

On the other hand, if you have a passel of kids or may be adding to your family in the future, you should definitely slide to the higher end of the emergency fund spectrum. In this case, you’ve not only got more mouths to feed, but you’ve also got more potential hospital co-pays to cover!

As your children fly away from the nest, you may consider scaling your emergency fund back. Put some of those liquid assets into better-earning investments, or take yourself on a nice vacation. But while you’ve got a house full of accident-prone toddlers or driving teenagers, a bigger emergency fund is definitely better.

Adding it All Up

As you’re setting your emergency fund savings goal, it’s wise to start somewhere in the three to six months’ of expenses (remember, it’s expenses, not income!) range, and then to adjust your goal based on these factors.

The bottom line, though, is that you should have something in an emergency fund, even if it’s only a few hundred dollars to begin with. Then, you can begin adding to that fund until you reach your total emergency fund savings goal.


Abby Hayes is a freelance blogger and copywriter who writes about personal finances for Dough Roller. She loves detailed budgets, dark chocolate and fat Victorian novels.

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  1. 75% of people live paycheck to paycheck – I wonder how many people actually have an emergency fund ? or do they rely on a credit card in their hour of need ?

    GetRichWithMe at 2:28 pm on September 4, 2013
  2. Good points to consider. I actually don’t go by the 3-6 months of income guideline for myself, instead opting for a much larger sum – currently $50k.

    Anton Ivanov at 8:31 pm on September 5, 2013
  3. When I first started working, living at home with my parents while they were still responsible for my major expenses (insurance, transportation, food, etc) I saved a MINIMUM 50% of every paycheck I got. So even with part-time/ seasonal “kid” jobs at the mall or whatever, I was able to put away a year’s worth of my expenses pretty quick. My goals went from first $1k savings, then 3 months’, 6 months’, one year of expenses saved, then dollar amounts like first $5k, first $10k (currently ongoing) as a baseline. Each milestone gave me the push to go for the next and also something to focus on when tempted to forego saving for spending on cheap thrills.

    When I got laid off six months ago that piggy bank kept me afloat without having to sacrifice my former standard of living, including a major car repair and caring for three cats on specialized diets.

    Even $50/mo is better than nothing and adds up to $600 by year’s end with very little deprivation— certainly worth giving up some overpriced coffee, takeout meals, and trendy gadgets, which IMHO is a big reason why so many people are living paycheck to paycheck these days, keeping up with the Joneses. Unless you are living in a third-world country making $1/day, you guaranteed have at least a couple dollars every week that can be saved instead of spent.

    lotus1922 at 5:49 pm on December 19, 2013

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