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How much money should I save in my emergency fund?


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If you’re trying to get your finances together and dive into any reading on personal finance you’re bound to see one term over and over again: emergency fund (EF).

The emergency fund is one of the basic building blocks of creating a solid financial foundation. It’s basically a fund where you keep money for, you guessed it, emergencies. Why? Because shit happens.

You get canned from your job, or your car decides to break down at the most inconvenient time, or a global pandemic that ravages every inch of the earth and triggers a recession. So, yeah, everyone needs an emergency fund.

But how much should you have exactly? Many finance experts recommend saving three to six months’ worth of expenses. So if your basic expenses (i.e. rent, utilities, food, transportation) are $3,000 per month, you’d want to save between $9,000 and $18,000.

It’s a ton of money, we know, and something that will take time to build. The thinking behind the three to six months rule is that within that time period you’ll be able to cover expenses and hopefully be able to get back on your feet again.

Given the utter shitshow we’ve experienced this year, some finance pro’s are recommending a 12-month emergency fund. So basically, try to save a minimum of three months of expenses for normal emergencies, and up to a year’s worth of expenses for a garbage fire year like 2020.

Of course, the right number for you will depend on your lifestyle, cost of living, and family sitch. For example, if you’re single and in a low cost of living area, you’ll probably be able to save less than someone who is married with three kids in New York City.

There’s no doubt about whether you should have an EF or not. It’s one of those not-fun-adulting-things that you’ll thank yourself for later. How much you put in there is based on your goals and risk tolerance, but as we’ve all seen this year, having more cash on hand is a good thing.

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