How Much Should You Actually Have in Your Emergency Fund?

Emergency funds prevent one unexpected expense from becoming a financial crisis. Here’s how to calculate your actual need.

The Formula

Monthly essentials (rent, utilities, groceries, insurance) x 3-6 months = Your target.

Example: $3,500/month x 6 = $21,000 emergency fund.

Adjust for Your Situation

Need more (6-12 months)?

• Self-employed
• Single income household
• Health issues
• Home owner

Can do less (3 months)?

• Dual stable incomes
• Excellent benefits
• Young, no dependents

Build It in Stages

1. $1,000 starter (covers minor emergencies)
2. 1 month expenses
3. 3 months expenses
4. 6+ months (full security)

Where to Keep It

High-yield savings account earning 4-5% APY. Examples: Marcus, Ally, Discover.

Don’t use checking (no interest) or investments (too risky for emergencies).

Start with $50/month. That’s $600/year toward security.