a red emergency sign in front of a large buildingHow Much Should You Have in Your Emergency Fund


Having an emergency fund is foundational to financial health. It cushions you from unexpected expenses and income disruptions. But how much should you save in this critical bucket? Here are some guidelines:

3-6 months of expenses

A common baseline is having 3-6 months of living expenses in your emergency reserves. For example, if your monthly costs are $4,000, aim for $12,000-$24,000 in accessible savings. This covers basics if you lose your job or have a major unplanned cost.

One year for homeowners

Homeowners should skew towards the high end of the range and have 6-12 months of costs on hand. Home repairs and maintenance issues inevitably crop up and can be expensive. A healthy emergency fund ensures these won’t wreck your finances.

Account for financial dependents

If you have children or family members dependent on your income for support, build in additional months of coverage into your target amount. Protect dependents from disruptions having 8-12 months of costs on hand.

Consider health care needs

For households where someone has significant medical costs, increase emergency savings to account for health plan deductibles, co-pays, and other out-of-pocket health expenses should an emergency arise.

Factor in income stability

If you work in a cyclical industry where layoffs are common or have an unstable freelance job, build a larger buffer of 12-18 months of expenses. More volatile income requires thicker emergency padding.

Include any major recurring costs

Look at your annual expenses like property taxes, car insurance, memberships etc. that only hit once or twice a year. Have sufficient reserves to also cover these semi-annual costs in a pinch.

Account for high local costs of living

In very high cost areas like San Francisco and New York City, it can take far more than 6 months of expenses to properly recover from a job loss or emergency. Let your local context guide fund targets.