How Much Should I Put In My Emergency Fund Per Month?

An emergency fund protects you in case of sudden expenses. This is money that you set aside for things like car and appliance repairs, medical care, or everyday bills in case you lose your job. 

Though staying on top of your bills and whittling down debt are both essential money goals, an emergency fund is a crucial safety net we all need. 

You can save money every month until you reach an amount that feels comfortable to you, then draw funds (and replenish them) as needed. 

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Why You Need an Emergency Fund

I’m a natural worrier, but I know I can’t prepare for every possible event. The next best thing? To prepare financially, so that money isn’t a problem on top of whatever else life brings.

Whether you need to temporarily cover bills, fly cross-country for a loved one’s funeral, or fix your air-conditioning during a heat wave, having money on hand is a lifeline. 

But without an emergency fund, you risk putting those expenses on a credit card or not fixing a potentially dangerous problem.

My family’s vehicle broke down on a road trip two years ago and we needed a tow, an extra night’s lodging, and a costly repair job. While we didn’t relish spending that money, we were so thankful for our emergency fund because it kept us safe. 

You don’t know when an accident will happen or your company will downsize. That’s why you need an emergency fund. 

@erikakullberg

Most people don’t do this after a paycheck 🤯 #lawyer #personalfinance #moneytok

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How To Calculate Your Emergency Fund 

Everyone’s ideal fund amount varies. Experts say you should have three to six months’ worth of expenses, so it depends on what your regular budget looks like. 

Take a look at your expenses. This doesn’t mean how much you spend each month, but how much you need to spend to keep your household going. If you already follow a budget, check the necessities listed in your monthly budget.

Necessary expenses include:

• Rent or mortgage payment
• Vehicle loan payment and other debts
• Other transportation costs (gas, public transit)
• Utility payments
• Insurance premiums
• Groceries
• Phone and internet services
• Other required monthly payments

Add up all of your necessary expenses (make an estimate for the variable ones like gas and food). 

Then, multiply that amount by three (months) to get the minimum total you should shoot for in your emergency fund. 

Note that you shouldn’t include optional expenses in your emergency fund calculations. Things like streaming subscriptions, shopping, vacation, and gifts can be dropped in an emergency. 

READ MORE: Laid Off? Do These Money Moves First

Emergency fund example

Let’s say you tally up all of your regular monthly required expenses and you need $5,500 to get by during an emergency. 

Based on that figure, you’d need to save: 

• $16,500 to cover three months without income 
• $33,000 to cover six months without income 

(You could also likely get more frugal with groceries, but as these are necessities, there’s not much wiggle room.) 

If your estimated spending on necessities is a lower amount, like $2,500 per month, you can adjust your target emergency fund to match it. 

In this case:

• $7,500 would cover you for three months 
• $15,000 would cover you for six months 

Other considerations on emergency fund calculations

Although a three-to-six-month emergency fund is a great goal, that may not be enough for everyone. If you have a variable income, it can be a good idea to bulk up your emergency fund to nine or even 12 months’ worth of expenses. 

As a freelancer, I know saving more helps smooth out the bumps in the road that come with variable income. If that’s you, try to save more for emergencies during higher-income months. That can float you through periods of lower income. 

You may also be thinking: I can’t possibly afford to save enough for six months! That’s okay.

If it’s really hard to save right now, please don’t be discouraged. Save what’s reasonable for you, even if it doesn’t seem like much. Start small and try to increase your monthly savings when you’re able. 

If you saved $50 per month, within a year you’d have a $600 emergency fund. That can bring a lot of comfort in case something happens. 

READ MORE: How to Start Investing When You Don’t Have Much Money

3 Questions to Ask Yourself Before Using Your Emergency Fund

Before dipping into your emergency fund, figure out what counts as an emergency. When a chance to spend money arises, ask yourself: 

1. Is it unexpected? (That flat tire wasn’t in your plans, for example.)
2. Is it necessary? (You can’t get home without fixing the flat tire.)
3. Is it urgent? (You need to fix the tire now, not in three weeks.)

Expenses should be unexpected, necessary, and urgent before you take money from your emergency fund to cover them. 

Sometimes you might be unsure of the answer. Typically, issues like car repairs or sudden medical treatment pass all three questions. 

But be careful not to be tricked by expenses that aren’t really urgent (like a spontaneous trip to the beach). 

READ MORE: Choosing the Right Savings Goals: Short-Term vs. Long-Term Financial Goals

Where To Keep Your Emergency Fund 

Don’t put your emergency fund in the stock market or underneath the mattress (both run the risk of you losing money)! 

The best place to keep your emergency fund is a high-yield savings account (HYSA) at an FDIC-insured bank. This is a savings account that pays you a decent rate of interest on the balance. Many of these accounts pay over 4.00% APY. 

For example, the SoFi Checking and Savings Account earns a 4.00% APY and the CIT Bank Platinum Savings earns a 4.55% APY.

While there are other types of accounts that earn interest, they’re less ideal for an emergency because your money’s not as accessible. 

With an HYSA, you can pull it out anytime without penalty, unlike with certificates of deposit (CDs) or IRAs, which charge you an early withdrawal penalty.

COMPARE: Best High-Yield Savings Accounts

FAQs

Is an emergency fund different from a savings fund?

An emergency fund is just that — money to be used only in emergencies. Before you spend your emergency fund, ask yourself if the expense is unexpected, necessary, and urgent. 

A savings fund is an account where you put money aside for a specific, known expense. You plan for it. For example, you might have separate savings funds for vacations, a down payment, or your next car.  

Is it better to have an emergency fund or pay off debt?

You should make both debt payoff and building an emergency fund a priority, but if you currently have nothing saved for emergencies, take care of that first. 

You don’t need to save up the full six months all at once. Something is better than nothing, to prevent you from going further into debt later on.

It can be tricky to balance both goals, but with time and discipline, you can accomplish both. 

TL;DR: Calculating Your Emergency Fund

An emergency fund works as a safety net to catch you when sudden costs arise. 

Don’t avoid building an emergency fund if your income is low or you can’t afford to save much right now — start with a goal you can handle, perhaps $250 or $500. 

You can’t know when emergencies will happen, but you can prepare for them. Prioritize your emergency fund now and future you will thank you for it. 

For more money management tips, check out these episodes of the Erika Taught Me podcast: 

• How To Budget for Beginners
• 10 Steps Towards Financial Wholeness
• The Psychology of Money

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