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How Large Should Your Emergency Fund Be?

Updated on November 16, 2009

Whether we have one or not, we all know that we should have an emergency fund. But ask ten people how large that emergency fund should be and you will likely get ten different answers. For a long time the standard was three months worth of your salary. Then it became three to six months. Then with the poor economy of the past couple of years, some financial experts recommended six to twelve months. If only it were that easy!

I think that the amount of emergency fund that a person should have will vary greatly depending on a lot of things. You need to consider how secure your job is. My husband is a teacher and is tenured. We have always felt comfortable with a smaller emergency fund than most experts recommend. If you work in a volatile market that is prone to layoffs, you will want a larger savings account. Consider what type of work you do - is it seasonal or dependent on the weather? Is there always a demand for it? Would you have to move out of state to continue doing it if you lost your job? Is it dangerous? These are just some of the things to consider.

Something else to think about is your expenses. If you have a large mortgage payment and two car payments, you will need a lot more money in a savings account if you were to lose your job or become disabled. If you have no debt other than a small mortgage, a smaller emergency fund will work for you. I don't think an emergency fund should be based entirely on your salary. I prefer to think of it based on my expenses. Our expenses are less than our salary, so if we want to have three months expenses in savings that is not as daunting a task as three months salary.

You also need to consider areas that you are willing to cut if you were to become unemployed. Maybe as a working adult you like having all the cable channels and getting your hair cut and colored every six weeks. If you lost your job would you want to live exactly the same way or would you be willing to cut some things out of your budget to make your savings stretch farther? If you are willing to cut, then you will need less money set aside to cover unemployment. If you want to keep living like nothing happened, beef up your savings account to cover everything.

Ideally everyone would have a large emergency fund to cover anything unexpected that could ever come up. It has to be individual though. Take some time to figure out how much money you should save for your emergency fund. Do some planning and start working towards getting the money set aside. It certainly won't hurt to have money in savings and it will make life less stressful for sure.


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    • swosugrad09 profile image


      8 years ago from Oklahoma

      3 months is what I've heard too. Thanks for writing!

    • profittaker profile image


      8 years ago

      Nice advice,look forward to reading more, thanks.

    • JOE BARNETT profile image


      8 years ago

      very good jennifer. you seem very practical. i'll be back!

    • Springboard profile image


      8 years ago from Wisconsin

      I tend to keep well over six months in my so-called emergency fund, but I think how much also depends on how you classify the funds. For example, my emergency money would include cash in savings, CDs, as well as other liquid securities and stocks. The latter do have consequences to being dipped into in an emergency situation—such as a job loss. But somewhere in that number you have to also build in the "cash" value vs. "unrealized" value so that the number you have in the event of needing it is more accurate.

      The problem with leaving too much money in just savings is that it typically doesn't earn a whole lot of interest. I like to keep my money moving. Actual cash is enough to cover minor emergencies, but the whole portfolio is enough to cover disaster.

    • goldy101 profile image


      8 years ago

    • profile image

      Gold prices 

      8 years ago

      You are right; we should have good savings with us. In my initial jobs, i have saved good amount as i was getting good salary and no responsibilities. Now when i have family and kids, it is easy for me to survive with good savings support at the back.

    • kathygirl22 profile image


      8 years ago

      Great advice.....thanks for taking the time to create this hub.

    • PillarComfortenya profile image


      9 years ago

      Great Huber,

      This is another master Piece, emergency fund is a must for every home. l wish we will all buy the idea.

    • Playathome2 profile image


      9 years ago

      Good advice on this one. But sometimes it is very hard to safe that amount of money especially being a single mother like myself. I still try my best to pay myself first every pay period because like my mother used to always say most people are always 1 paycheck from being homeless and I have made plans not to be apart of that group.

    • johnr54 profile image

      Joanie Ruppel 

      9 years ago from Texas

      Another thing to consider is how liquid your other assets are. If they are all tied up in a 401k you may need a larger fund, but if they are in stocks in a taxable brokerage account that could be sold tomorrow then you could easily get by with less.

    • profile image

      air beds 

      9 years ago

      Excellent advice. Unfortunately way too many people are not setting aside an emergency fund. I have several friends who have lost their jobs and are now really scrambling due to not planning ahead. Nearly everyone can reduce their expenses, at least partially ... this is a good start, as then the amount of the emergency fund, if ever needed, can be less.

    • Wedding101 profile image


      9 years ago

      Great advice!

    • J  Rosewater profile image

      J Rosewater 

      9 years ago from Australia

      We have always lived very frugally - so we don't care how much money banks (or anybody else for that matter) make. We consciously save before we eat, even. We invest rather than give each other gifts. We hardly do anything except have fun talking around our own breakfast table! This has meant we consider things in much the same way. I'm not saying we agree on all things, but we are not fundamentally divided - and that's the vital thing.

      Families cannot really create an emergency fund if they are all rowing the boat in different directions. An emergency fund can only exist in a harmonious background.

      I think I'm right when I say that many families do not have one because one of them just does not see the point of saving rather than spending on stuff they want NOW.

    • profile image


      9 years ago

      Yes you are right about having an emergency fund but how possible is that at this time of inflation when all you can do is live paycheck to paycheck. Realistically banks are making a killing what with overdraft fees getting higher and their having the ability to bounce incomming although your paycheck came in at the same time as an ACH.As for cutting expensive my family and I have cut down to the bear minimum all we have left is our utilities our rent and our food unfortunately my family is not the tipical 2 parents 2 children and a dog.So here to our emergency fund God help us.

    • salt profile image


      9 years ago from australia

      thankyou, I appreciate this hub and the thought gone into it.

    • emievil profile image


      9 years ago from Philippines

      Good tips here. My husband and I are still building up our emergency fund. We already have enough just in case we go belly up. What we're building now is an emergency hospital fund - so that if something bad happens to us (knock on wood), we'll have something to draw on and not depend on government health benefits. Thanks.

    • profile image


      9 years ago

      Great article; yeah, even if we know what we need - it's not that we have it set!

      Thank you for writing!

    • 1st Class Travelr profile image

      1st Class Travelr 

      9 years ago from Jackson, MS

      Great hub! You are definitely giving great advice when you published this hub. There are many of us out here that don't even realize having an emergency fund is something mandatory that we should do. Many people don't care to open an emergency fund, but rather sit around and depend on mom and dad to help them out whenever they come into a financial crisis. Thanks, I will pass along this hub.

    • Joe Rodgers profile image

      Joe Rodgers 

      9 years ago

      Great hub!

    • DiamondRN profile image

      Bob Diamond RPh 

      9 years ago from Charlotte, NC USA

      You are totally right about the necessity for nest eggs and planning for emergencies.

      A little addendum: We are just entering into what should be a comfortable retirement, even with the down economy. We have almost always spent less than we made. If we had to buy something expensive and it wasn't an emergency, we agreed to save half of the purchase price as a down payment. That helped to keep us from making impetuous purchases. Looking back it was amazing that we stayed completely out of debt, even after a six-month illness for me and two years of unemployment for my wife.

      PS. My grandfather was a Greek immigrant. He came here penniless when he was about 25. My grandmother had nothing to worry about, relative to money after he died. He told me never to charge anything that would be gone before it was paid for. That's where a lot of people get in trouble.

    • Song-Bird profile image

      Renee Hanlon 

      9 years ago from Michigan

      It certainly gives some peace of mind to have an emergency fund set aside. This is good advice for everyone and good to think about saving enough for three monthes expenses versus three monthes salary in some cases. That made a lot of sense to me.

    • lisalomas profile image


      9 years ago from New Zealand

      Very good that you say it goes by industry. I think it also matters what stage in life your at or if your a home owner for considering. The more is always better.

    • breakfastpop profile image


      9 years ago

      Very smart, intelligent hub.

    • Hello, hello, profile image

      Hello, hello, 

      9 years ago from London, UK

      Good question, good advice. Thank you.

    • Bail Up ! profile image

      Bail Up ! 

      9 years ago

      Good advice. As hard as it may seem to commit to a savings plan, very well worth it.


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