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How Much Money to Have in an Emergency Savings Fund (Easy Calculation)

How much emergency savings should I have? Help figuring out your emergency savings amount, plus the motivation to do it.

How much emergency savings should I have?

white calculator with gold keys on white desktop, text overlay

This is not the sort of question you want to be asking when you're IN an actual emergency. It's one to confront and work through BEFORE an actual emergency hits.

And there's no time to lose when it comes to life throwing you surprise curveballs.

So, let's get going!

How Much Money Should You Have in an Emergency Fund?

How much is a good emergency fund?

Here's the thing: your recommended emergency fund amount depends on two things.

  1. Your monthly expenses
  2. Your situation

Typically, you should have 6-8 months of expenses saved up in an emergency fund.

Not income, but expenses.

But, if you are doing something risky (or plan on doing something risky – like starting your own business), OR, if you suspect you might be losing your job in the future, OR, if there is only one working adult in your household, then you should go with 8 months to 1 year of expenses.

Why? Because your situation is a little more risky than a dual-income household, where it's not likely both partners will be unemployed at the same time.

For example, before I quit my day job to pursue my business full-time, I made sure we had over one year of expenses in our emergency fund.

It really all depends on how much emergency savings is going to let you sleep well at night.

So, how do you figure out your 6-12 months of expenses, based on how long you need your emergency fund to cover?

Psst: here are some great emergency fund examples to help with seeing what others are doing.

Emergency Savings Fund Calculator – How Much Emergency Fund Calculator

You can plug all of your information about your monthly bills, and whatever emergency fund savings you already have (wait, you don't have any? Read the next section) into this emergency fund savings calculator.

Remember that for the area where you fill in “Number of Months You Want the Emergency Funds to Last”, you should put in the number of months that makes sense for your particular situation.

As discussed above, this means you'll want to cover more months (8-12 months) if you have a “risky” situation, like having only one person employed in the household or quitting a job to start a business.

And you'll want to stick to around 6-8 months for other situations, such as when there are two people working two different jobs in the household.

Use one of these 11 free printable emergency fund trackers to help you stay on track until your account is fully funded.

Pro Tip: You want to make sure that, on top of being able to cover your monthly expenses, you also have enough in your emergency savings fund to cover your deductibles on various insurance plans. So, add that in!

So, what happens if you don't have any emergency fund at all…and you get into an emergency?

Motivation to Keep Saving for an Emergency Fund

Your Emergency savings fund (aka, the “oh sh*t fund”), is not the most glamorous thing to be funneling your money towards. 

At least with a fun savings goal like the honeymoon savings goal we had, you know that you + your favorite person in the world will get a huge payoff at the end of it all. 

Or when you're saving for a down payment on a dream home, you know at the end of it you'll get that yard and beautiful bathtub that's been dancing through your head.

But building an emergency savings fund?

Well, that feels more like trying to get through the last 27 minutes of a long workday with a busted clock.

Not to mention its inherent value is in (drum roll, please) sitting there, ready to be used if necessary, and best if never used at all.

Let these reasons show you why building an emergency fund is way less annoying than you'd think (meaning, you'll get motivated to get started quicker!).

Psst: also, don't neglect other ways to prepare for an emergency. Check out these family emergency binder free printables to get yourselves set up.

Reason #1: You're Building Financial Independence

Squirreling money away in an account for when (not if) something happens that is beyond the capability of your monthly paycheck to cover is a) very adult of you in a Carrie Bradshaw-getting-a-mortgage kind of way, and b) one of the best ways to become financially independent from others, which is quite empowering + sexy.

Wondering what you could ever possibly use your emergency savings fund for?

Think of your emergency savings fund as the buffer between you and:

  • Moving back home with your parents
  • Taking out massive loans at unfair interest rates because they've got you right at your most vulnerable moment
  • Making bad, short-term decisions centered around you being able to pay your rent at the end of this month

Reason #2: You Don't Need to Save as Much as You Think

My early twenties is when I first heard of the concept of emergency cash funds. I don't remember which financial pundit this nugget of wisdom filtered down from, but I do remember being both attracted to and annoyed by, the idea.

Attraction: I naturally gravitate towards multiple back up plans, as well as place a high value on financial independence, so this clicked for me.

Annoyance: Saving up 6-8 months of money seemed so far out of my perpetual, entry-level paycheck's reach.

So when I found this specific piece of information out, I heaved a humongoid sigh of relief: you save up 6-8 months' worth of expenses, not 6-8 months' worth of income.

And we're talking bare-bones, what-do-I-need-to-survive expenses (sorry, eating out and pedis don't make the cut…but neither does continue to save for retirement unless you can swing it).

If you lose all the fluff and just keep the necessities – rent/mortgage, insurance, grocery store shopping, gas, debt minimum payments, etc. – then how much do you really need in order to survive for one month?

Now multiply that number by the number of months you want to sock away, and that's your savings target.

Psssst: Wondering how to start an emergency fund with no money? I challenge you to sign up for the automatic savings app Digit.co, and any savings this app automatically sweeps from your checking account to a savings account becomes your emergency fund. We saved up over $500 in just two months this way, without even thinking about it! 

Reason #3: You Won't Be Funding this thing Forever

So here's the really cool “whew” about emergency savings accounts: once you reach your target, you get to funnel your money elsewhere. Unlike many things in life, there is an actual stopping point and a time when you can celebrate because you completed a goal in its entirety.

You only need to make changes/add more to your account when:

  • Your Life Circumstances Change: Adding to your family, marriage/divorce, and making lifestyle design choices (such as cutting out of the workforce to start up a business, or choosing one parent to stay at home) are all reasons to reassess how much you need to survive each month.
  • You Deplete Your Resources: If a situation creeps up and you've exhausted all possibilities of paying for it except to take money out of your oh sh*t fund, then you'll need to tap it. Afterward, funnel the money you are saving towards other goals back into your emergency fund until it is fully stocked again.

Pssst: wondering is savings the same as an emergency savings fund? Nope. They're two different savings accounts you need. Here's how to add a boatload to your emergency savings fund, even if you're living paycheck to paycheck.

Reason #4: You Can Earn Some Money From it

One more thought to take the edge off of saving for emergency funds, and then just watching several thousand dollars of your money sit there without touching it: you can earn some money on the money that you save.

It's not going to be much, as the interest rates right now are abysmal.

But let me ask you this: if tomorrow you used the money you could be putting aside into an emergency savings account to buy a sassy new pair of jeans, would that pair of jeans ever earn you another dime?

Didn't think so.

Do you have an emergency savings fund? Do you know how much should go into it? Where are you at on stocking it up? 

Help! I Don't Have an Emergency Fund…Am I Screwed?

I want you to excel at finances, not make choices that might box you in or cost you buckets extra down the road.

But the fact is, you need to be aware of all the tools in your money toolbox − the ones written into Forbes' polished money columns and the ones pushed down to page 3 of “I-Need-Help-and-Only-have-$100-in-Savings” Google searches − so that you can make the best possible decisions for you and your family.

And that includes the tools I usually don’t like to talk about because they might not make long-term financial sense (but sure as heck can help you out of a money bind).

As much as I love to tout the many benefits and virtues of owning an emergency fund − probably because I’ve been on the lucky end of needing one and actually having it to tap in my twenties − I know that you may not have one.

And if you do have one (winner, winner, chicken dinner!), it may not be fully funded.

So when the next emergency hits…are you screwed?

Probably not.

Let me be very clear: you need an emergency fund.

This section is not meant to justify surviving the rest of your life without one. However, there has to be other backup plans for the millions of Americans who do not possess one, or whose fund is really more like the holding pen for a few extra piggies.

I'm here to help you. Not only to help with letting you know what else is out there, but to help you sleep better, put down the cheesecake slice (the second one that's just for comfort), and let go of some of the anxiety tension held in your neck.

If Plan B is to fall back on your emergency savings fund, then let me give you some Plan C's.

Plan C #1: Get Thee Awesome Insurance Coverage

Insurance is an important protection for all of us.

But if you don’t have an emergency fund, then you best make double sure you have excellent insurance coverage.

In the 5 months that half of our household was unemployed, when we slashed spending on almost everything, we never once considered ditching any of our insurance policies. The fact is, one accident, one health issue, or one deadly rain storm here in Houston could have taken us out of an uncomfortable situation and thrust us into a downright financially devastating one.

Don’t put yourself in that situation.

Bonus tip: Take a look at your deductibles on each of your insurance plans. For example, we have a $500 deductible on one of our cars, and a $1,000 deductible on our flood insurance plan. Even if you're not ready to build an emergency fund, make sure you set aside enough to cover your deductibles in the event of having to submit a claim. Can't swing that? Then call your insurance providers and ask to get your deductibles lowered. This will most likely cost you extra each month, a cost for not having the money in your emergency fund to fall back on. Remember to make this a temporary situation!

Plan C #2: Give Yourself the Gift of Financial Flexibility

You may have some financial obligations – like a mortgage, student loan debt, credit card debt, etc. – that don’t care whether you're in dire straits or whether you're bathing in ten-dollar bills. In times of need, it can be helpful to lean on built-in financial flexibility.

And the time you want to build in that flexibility? Is before an emergency hits.

The way to do this is to lengthen your loan terms, whenever it’s possible to do so without *bad* financial repercussions. Such as:

  • Go with a 20 or 30-year Mortgage Loan: You will almost certainly have a higher interest rate for choosing one of these instead of a  10-year mortgage term. However, your loan payment each month should be more comfortable and easier to shoulder in the event of an emergency. And the bonus with this is in the “good” times, you can set aside a few extra bucks to either pay off other consumer debt or to build up that emergency fund because your mortgage payment is not a stretch.
  • Extend Your Federal Student Loan Repayment Period: There are typically four options for extending federal student loan payments, including graduated repayment, income-sensitive repayment, extended repayment, and loan consolidation. By extending your repayment period, the monthly amount you are liable for will be less. Once again, this opens up breathing room in case of an emergency, plus the ability to send extra dollars into higher-costing (i.e. higher interest rate) debt payoff and/or building an emergency fund.

Note: Extending your repayment loan term has the consequence of increasing the amount of interest you will pay over the life of the loan. You can get around this with some financial discipline. Even though you're formally extending the length of repayment to decrease monthly payments in the event that you need to go down to bare-bones spending, you can still send in extra payments and pay off the loan in the amount of time that you want to, once you are through the emergency period.

Plan C #3: Choose a Roth IRA as One of Your Retirement Accounts

Did you know that if you invest in a Roth IRA retirement account, any of the money you put in there you can withdraw at no penalty?

You cannot withdraw the earnings of that money without a penalty, and you also will not be able to replenish that money after you are back on your feet (meaning there is a $5,500 annual limit on the amount of money you can invest with an IRA, Roth or Traditional. And so once you take out money, you can't then contribute $5,500 for the year plus the money you took out, only up to $5,500). However, in extreme circumstances, this could be an option for you.

Note: I loathe the idea of tapping retirement accounts – money you are going to need when you are older – to pay for things now. So I want to emphasize that I am only putting this option out there because sometimes, you might be out of options.

Plan C #4: CYA with an Established Credit Line

One way to get out of an emergency (when you don’t have an emergency fund) is to make sure you have an established credit line in place before you need to use it.

Let me be clear about this one: I never want someone to go into debt. Ever. In fact, my stance is just the opposite; I help people get out of debt in the most efficient and quickest way possible.

But if you don’t have an emergency fund, then you might be out of options (and please, exhaust all possibilities before using this one).

The thing is, building an emergency fund is not as annoying as you’d think. So get started! Today is better than next week, and yesterday was better than today. In the meantime, fingers crossed that you don’t need to use any of these tools above.

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Amanda L Grossman

Personal Finance Writer and CEO at Frugal Confessions, LLC
Amanda L. Grossman is a writer and Certified Financial Education Instructor, Plutus Foundation Grant Recipient, and founder of Frugal Confessions. Over the last 13 years, her money work has helped people with how to save money and how to manage money. She's been featured in the Wall Street Journal, Kiplinger, Washington Post, U.S. News & World Report, Business Insider, LifeHacker, Real Simple Magazine, Woman's World, Woman's Day, ABC 13 Houston, Keybank, and more. Read more here or on LinkedIn.


Tuesday 27th of November 2018

We've always kept a full year of normal expenses, not survival level but normal level. But it doesn't represent a significant part of our net worth so it just makes life smoother to have a big enough amount of working capital to cover overseas vacations or new cars without moving things around. But that's as a couple that has achieved FI many years ago. For someone who is early in their journey it would be impossible and unwise to have so much in cash earning poor returns.