How much should be in an emergency fund?

If you've ever faced a surprise car repair, job loss, or unplanned trip to the emergency room, you probably know how important it is to have money in a savings account. But how much do you actually need to stay financially protected when life throws you a curveball?

This post will explore what an emergency fund is, the best account to keep it in, how to calculate the amount to save, and tips to start saving quickly if you don't have one yet.

What is an emergency fund?

An emergency fund is a dedicated savings reserve set aside for unexpected expenses—like medical bills, car repairs, or a sudden job loss. It's typically kept separate from your everyday spending and other savings goals, such as a future home or a vacation, so it’s there when you truly need it.

It acts as a financial safety net, helping you avoid going into debt when life doesn’t go as planned.

How much should be in an emergency fund?

There’s no one-size-fits-all number, but a good rule of thumb is to aim for three to six months’ worth of essential expenses. This means creating "bare bones" budget of things like:

• Rent or mortgage payments
• Utilities
• Groceries
• Transportation
• Insurance premiums
• Minimum debt payments

If your income is unpredictable, you’re self-employed, or you're supporting a family, you might want to lean closer to six months—or even more—to create a stronger safety net.

Starting small is okay. If saving a few months of expenses feels overwhelming, begin with a smaller goal like $500 or $1,000. The key is to build your fund gradually over time, so you’re better prepared for life’s unexpected moments.

Where should you keep your emergency fund?

Where you keep your emergency fund matters. Your emergency fund should be easy to access—but not too easy. The goal is to keep it separate from your daily spending, while still being available when you need it most.

Here are a few characteristics to consider when making a savings plan:

Liquidity

Keep your emergency fund in a place where you can easily access it. For example, a high-yield savings account or a money market account is preferable to a CD or Roth IRA, which might have early withdrawal penalties.

Money market accounts often offer slightly higher interest rates and may come with check-writing or debit card access. Just make sure there are no high minimums or withdrawal limits.

If you decide to use brokerage services to open a money market account for your emergency fund, make sure your broker and your accounts are FINRA and SIPC certified.

Safety

Your emergency fund serves as a backup, so it should be in a safe account that’s not exposed to market fluctuations. While investing your emergency fund might seem like a way to grow it, the stock market’s ups and downs can make your money unavailable when you need it most. 

Keep it in an FDIC-insured bank, which means your money is bank guaranteed for account balances up to $250,000 per person per ownership category. Most banks will display “member FDIC” on their websites, or you can use an FDIC tool called BankFind Suite to search for FDIC-insured banks.

When do you use your emergency fund?

Your emergency fund is there for exactly what it sounds like—emergencies. That means unexpected expenses that are urgent, necessary, and unplanned.

Here are some examples of when it’s appropriate to dip into your emergency savings:

• Job loss or income disruption: To cover rent, bills, and groceries while you get back on your feet.
• Urgent home repairs: Like fixing a broken furnace in the middle of winter or repairing a roof leak.
• Unexpected medical expenses: When insurance doesn’t cover the full cost, and you need care immediately.
• Car repairs:  If your vehicle breaks down and you rely on it for work or daily responsibilities.
• Emergency travel: Such as flying out of town for a family emergency.

Try to avoid using your emergency fund for planned expenses (like a vacation or routine car maintenance) or non-essentials (like shopping or dining out). 

If you’re unsure, ask yourself: Is this unexpected? Is it urgent? Is it necessary? If the answer is yes to all three, your emergency fund is likely the right tool.

Tips to build an emergency fund

If you want to build an emergency fund quickly, here are some tips:

• Automate it: Set up an automatic transfer to your emergency savings account every time you get paid. This helps you to grow your savings without having to think about it.
• Sell to start: Try selling a few things you no longer use to grow your account. Outgrown toys, unused gadgets, or extra kitchen tools can all bring in cash. Even putting away your first $100 can create momentum—and make saving feel more doable and rewarding.
• Track your spending: It doesn’t sound fun, but tracking your expenses is actually a great way to identify your money habits and see where you can make cuts. You might be surprised to learn that with a few habit adjustments, you can free up money to add to your savings account.

The bottom line

Building an emergency fund might not feel urgent—until it suddenly is. Whether you're just getting started or looking to grow your existing savings, having money set aside for the unexpected can bring real long-term peace of mind. 

Whether you decide to save a three-month emergency fund or one that could last you a year, what’s important is that having one (even if you start small) will help you to feel more secure financially.