How big should your emergency fund be?

Short answer: keep three to six months of essential expenses in savings you can reach quickly. Keep more, often nine to twelve months, if your income is variable, you are self-employed, you are the only earner, or you support family elsewhere.

Count essential expenses, not income

• Housing, utilities, food, insurance premiums, transportation, minimum debt payments, childcare
• Leave out what you could pause in a crisis, like travel or dining out

Who needs more

Build it step by step

1. Start with $1,000 for small surprises.
2. Set up an automatic transfer every payday.
3. Direct raises, bonuses, and tax refunds to the fund.
4. Reach one month, then three, then your full target.

Agent tip: Name the account "Emergency only". People raid it less when the name says what it is for.

Where to keep it

• A high-yield savings or money market account
• Separate from checking, but easy to reach in a day or two
• Not invested in stocks

Insurance does the rest

An emergency fund covers months, not decades. For the biggest risks, a death or a long illness, insurance is the backstop. See term life and living benefits.

Sources

• Consumer Financial Protection Bureau