How Much Should I Have in My Emergency Fund?

Building Your Financial Foundation: The Emergency Fund

An emergency fund is a stash of cash reserved for unexpected life events, like a job loss, medical bill, or urgent home repair. Without it, you might be forced to take on high-interest debt or sell investments at the wrong time. The first step is figuring out the right amount for you.

The 3-to-6 Month Rule

The most common advice, echoed by the Consumer Financial Protection Bureau, is to save 3 to 6 months' worth of essential living expenses. This range allows for flexibility based on your personal situation.

• Consider 3 Months If: You have a stable job, multiple sources of income in your household, or low fixed expenses.
• Aim for 6 Months (or more) If: You are a single-income household, work in a volatile industry, are self-employed, or have dependents.

How to Calculate Your Living Expenses

To get your target number, you need to tally up your essential monthly costs. This includes:

1. Housing: Mortgage or rent payments.
2. Utilities: Electricity, water, gas, and internet.
3. Food: Groceries and essential household supplies.
4. Transportation: Car payments, insurance, and fuel.
5. Debt Payments: Student loans, credit card minimums.
6. Insurance: Health, home, and auto insurance premiums.

Exclude discretionary spending like entertainment, dining out, and subscriptions. Once you have your monthly total, multiply it by 3 and 6 to find your target range.

Where Should You Keep It?

Your emergency fund should be liquid and accessible. A high-yield savings account is an ideal choice because it keeps the money safe from market fluctuations while still earning a modest amount of interest.

Let Moneko Help You Succeed

• Calculate Your Goal: Use Moneko’s Savings Goals Calculator to determine your precise 3-6 month emergency fund target and create a timeline to reach it.
• Automate Your Savings: Connect your bank account and set up recurring transfers to build your fund effortlessly.
• Ask for Guidance: Unsure where to start? Chat with our AI Financial Educator about the best strategies to build an emergency fund fast.

Disclaimer: This content is for informational purposes only and does not constitute financial advice. All investment decisions carry risk. Conduct your own thorough research or consult a qualified financial advisor.