Your Emergency Fund: How Much Is Enough?

Ever have one of those months where everything seems to go wrong? The water heater breaks, the dishwasher stops working, and suddenly, you’re a regular at urgent care. Then, just as you’re heading to work, smoke starts rising from under your car’s hood.

Life is unpredictable, and emergencies often seem to come all at once. That’s why having an emergency cash fund is so important.

Studies show that over two-thirds of Americans are unsure they could cover a month’s expenses with their savings, and 43% say they wouldn’t be able to handle an unexpected $1,000 cost.

How Much Should You Save?

There’s no one-size-fits-all answer. The size of your emergency fund depends on your lifestyle and financial situation. Homeowners, parents, or those with irregular income may need to save more, particularly in case of a job loss or ongoing financial emergencies.

Starting Small

If saving several months of expenses feels overwhelming, start with a smaller goal like $1,000, and build gradually by setting up automatic monthly contributions. Avoid dipping into this fund for non-emergencies—budget separately for larger planned expenses to keep your emergency savings intact.

Where to Keep It

Traditional savings accounts are a common choice, offering safety and FDIC insurance (up to $250,000 per depositor). Some may prefer money market accounts or funds. While money market accounts are insured, money market funds are not and may fluctuate in value.

Review the prospectus carefully before investing in money market mutual funds to fully understand their risks, fees, and objectives.

Be Ready for the Unexpected

Emergencies are inevitable, but the financial strain doesn’t have to be. Creating and maintaining an emergency fund can help you stay prepared and minimize the impact of life’s unexpected events. If you don’t have one yet, now’s the time to take the first step.