It’s one of the most fundamental rules of personal finance — but if you ask 11 different experts about it, you could get 11 different answers.
That’s sort of the point. The amount of money you should have in an emergency fund is something only you can decide, because it’s got to be based on your own situation and what makes you feel secure.
Given the record unemployment caused by the COVID-19 pandemic, which left millions of Americans without regular income, the benefits of a financial safety net are as clear as ever. Saving anything in an emergency fund is great, and depositing whatever you can will build a cushion over time. That money can help you pay your bills if you lose income or incur an unexpected expense. But having a clear, intentional savings target is the best way to achieve true peace of mind.
So how much should you really save in an emergency fund, and how do you arrive at that number?
To help you think through the decision, we’ve collected advice from a range of experts. They each recommend a slightly different approach, but the takeaway is clear: the purpose of an emergency fund is to help get you through difficult times, so it needs to be big enough to cover your basic expenses for a set period of time. Just how long depends on your job security, your risk tolerance, your age, and other factors. Some say you can get away with a few months’ expenses or less, but all would agree that it pays to aim even higher.
Use these recommendations as a guide to determine how much cash will make you feel comfortable with your emergency fund, keeping in mind that a month’s expenses represents the minimum amount of money you need to survive—not your regular budget. Then get to work on reaching your goals with our guide.
Dave Ramsey: $1,000; then three to six months of expenses
Dave Ramsey, host of “The Dave Ramsey Show” and author of the best-selling book Total Money Makeover, is totally focused on helping people get out of debt. But emergency funds have a place in his advice, too.
If you follow Ramsey’s Seven Baby Steps, which are designed to help people take control of their money through debt payoff and building wealth, the first step is to establish a starter emergency fund of $1,000.
That’s not the final savings total Ramsey recommends for a fully funded emergency account, though. After all your debts (except mortgage debt) are fully paid off, he advises building your emergency fund to cover your expenses for a solid three to six months.
Erin Lowry: At least one month of expenses
Saving money while paying off debt can be a tricky balance, but according to Erin Lowry, author of the “Broke Millennial” book series, you shouldn’t sacrifice your emergency safety net to speed up debt payoff.
No matter where you stand in your debt journey, you should have some cushion, and $1,000 isn’t going to suffice for most people, in Lowry’s opinion.
“The bare minimum emergency fund, even when paying off debt, should be a month’s worth of basic living expenses,” Lowry says. “I think the environment we’re currently living in is a really good example of why $1,000 just doesn’t cut it anymore — especially if the bottom falls out all at once.”
At least one month of your basic living expenses will give you enough cushion to begin working out a plan when an emergency hits, says Lowry.
Jared Andreoli: At least three months of expenses
According to Jared Andreoli, CFP, financial planner and founder of Simplicity Financial in Milwaukee, Wisconsin, his clients’ individual preferences help inform the amount of money that should go into their emergency funds. But at least a few months’ expenses is a good starting point.
“I advise clients to have a minimum of three months of expenses in their emergency fund,” he says. “I also tell clients your emergency funds should be big enough for you to sleep at night. Ultimately that is what the emergency fund is for. You need to feel comfortable with it.”
But there’s an upper limit, too. If your emergency fund starts to grow bigger than 12 months’ worth of living expenses, Andreoli recommends taking a moment to reflect on why you feel you need that much — and how that extra cash may better serve you elsewhere, such as in your retirement fund or a brokerage account.
Greg McBride: Six months of expenses
According to Greg McBride, CFA, chief financial analyst at Bankrate.com, setting a savings goal is important, but you should remember your goal is a destination, not a starting point.
“The goal is to have enough to cover six months of expenses,” he says. But reaching that number depends on how well you develop a savings habit you can build upon over time. “Your starting point is all about establishing that habit. Set up a direct deposit from your paycheck into your dedicated savings account. That establishes the all-important habit, and then it happens automatically.”
McBride also recommends using this method to work toward multiple financial goals simultaneously. In addition to your emergency savings, also keep your retirement savings in mind. “If you’re not saving at least 10% of your income, you need to get there pronto,” he says. “And once you get there, you want to eventually work that up to 15%.”
Determining how much to allocate to each account depends on your individual situation.
“It’ll depend on where you stand on emergency savings to begin with: If you don’t have any, you’ll want to err on the side of putting more in emergency savings,” McBride says. But if your employer matches 401(k) contributions, he says, “You’ll want to make sure you’re contributing enough to maximize that employer match” before putting more money into savings.
Farnoosh Torabi: Six to nine months of expenses
“In the last recession, at peak unemployment, it took an individual about eight months, on average, to find a new job. That’s why I say six to nine months in general is a good rule of thumb,” says Torabi, a financial journalist and host of the “So Money” podcast. For entrepreneurs or those who are self-employed, Torabi bumps that recommendation up to a 12-month minimum of expenses in cash.
But she also cautions that the effects of the COVID-19 pandemic and its toll on the economy are likely to be lasting; as a result, it’s important to continue to rein back spending and put more toward your emergency reserve, especially over the next few years.
Suze Orman: Eight months of expenses
Orman, a New York Times best-selling author and host of the podcast “Women & Money,” has long recommended an emergency fund goal of eight months of living expenses. But she, too, stresses that this is a goal you should work toward; you can begin by contributing whatever you can.
“Sure, it could take years to reach your eight-month goal,” Orman writes in her Emergency Fund 101 blog post. That’s OK, she says. “The important issue is that you are starting to save today and so every month you will be moving closer to your goal.”
More recently, Orman added a stipulation for those who are at or near retirement:
“What I’m suggesting for everybody right now is that when you do go into retirement, that you have a three-year cushion in cash,” Orman told host Jean Chatzky on the podcast “HerMoney,” citing the uncertainty of today’s markets.
“A bear market — from where it goes from the top to the bottom, back to the top again — is usually 3.1 years,” she said. “And that’s why I decided on three years. But right now you’ve just got to really, really stay the course here.”
Liz Plot: Three to 12 months of expenses
For Liz Plot, CFP, associate financial planner at Ballast Point Financial Planning in Columbia, Maryland, the ideal emergency fund is very much dependent on individual circumstances.
“We generally recommend that people have between three and 12 months of expenses saved up,” she says.
To determine a place within that range that feels right for you, consider details like your job security, future plans, and overall financial health.
“For most people, six months is sufficient. But if you’re self-employed, maybe a little more would be more appropriate,” Plot says. “If you’re expecting an upcoming job transition, your job contract is complete, or you’re going to finish school and you expect to need some time to find a new job, then you’d want it to be built up a little bit more.”
Ramit Sethi: 12 months of expenses
Ramit Sethi, New York Times best-selling author and founder of Iwillteachyoutoberich.com, typically recommends saving three to six months of expenses.
However, given the current pandemic and financial crisis, Sethi has reevaluated that number; now, he recommends aiming for a year’s worth of expenses in your safety net. This is to better account for the uncertain economic situation and growing unemployment rates.
“Money in your pocket now is worth more than money in your pocket later,” Sethi says.
Jill Schlesinger: Six to 12 months of living expenses — or more
Jill Schlesinger, host of the “Jill on Money” podcast and business analyst for CBS News, recommends keeping a relatively conservative emergency fund: “You should have six to 12 months of your living expenses in a safe place that’s accessible to you,” she says.
She knows this isn’t very exciting advice. “People find it to be incredibly boring, and I understand that,” she says. However, “it is incredibly boring except when you need it. You never know when you’re going to need it.”
Those approaching retirement should be even more concerned with how much they’re saving, according to Schlesinger, so they can avoid withdrawing from their investments during market downturns. For those people, she recommends bumping up your emergency reserve to one or even two years’ worth of expenses.
Dana J. Menard: Three to six months for couples, six to 12 months for individuals
“Some people are more willing to risk it,” says Dana J. Menard, CFP, founder and CEO of Twin Cities Wealth Strategies in Maple Grove, Minnesota. “Others like to know that they have a solid buffer. I recommend my clients figure out what they are truly comfortable with.”
That risk assessment may depend on how many incomes your household has coming in. As a rule of thumb, Menard recommends three to six months of fixed expenses for couples, but bumps that to six to 12 months of fixed expenses for single individuals.
“I like to work my way through some exercises to figure out how they feel about shouldering the risk of having to come up with that money should an emergency arise,” he says. Ultimately, the most important thing is that, upon reaching your end savings goal, you feel secure in your ability to weather unexpected hardship.
Eric Maldonado: Six to 12 months of expenses
Eric Maldonado, CFP, a financial advisor at Aquila Wealth Advisors in San Luis Obispo, California, also recommends an emergency fund buffer of six to 12 month of expenses.
“This becomes your stress valve,” he says. “You want to be able to make big life decisions based on what you value most. If you don’t have enough cash on hand, you end up having to make hasty decisions due to time constraints.”
And ultimately, that’s what your emergency is built for: peace of mind.
No matter what hardships or opportunities come your way, “You won’t have to make concessions on your priorities when you have time to think, seek advice, and see how it all plays out,” Maldonado says. “It’s harder to make big decisions while experiencing stress or anxiety. Having six to 12 months of cash reserves allows you to remove some of that stress and anxiety. It gives you time and options.”
No matter what specific total you decide on, experts tend to agree a well-stocked emergency fund consists of several months of living expenses stored safely in an interest-earning, easily accessible account.
Keep in mind that in order to estimate a month’s expenses, you should consider the minimum amount of money you need to survive, as opposed to your spending habits under normal circumstances.
You may initially aim to save one month’s expenses, then bump that goal to three months, six months, or more once you reach your initial goal. The most important thing is you establish the habit that will help you reach those savings goals.
Open a high-yield savings account, set up automatic transfers, and start transferring any leftover funds at the end of each month to your emergency fund, so that when an unexpected cost does arise, you’re prepared to face it.
To learn more about saving for emergencies and what to do if you experience lost wages or an unexpected expense before you’ve reached your savings goals, check out our emergency fund savings guide.