How Much Money Should You Have in Your Emergency Fund?

by Samara

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how much money should you have in your emergency fund

Most people know that it’s important to have some money saved for emergencies, but how much is enough? The answer depends on many factors such as where you live and how large your family is.

So how much money should you have in your emergency fund? It’s a question that many people struggle with. Should I have $10,000 or $50,000 or more? What is an emergency fund used for and when do I need to use it? The answer to these questions will depend on the person asking them.

Generally speaking, the more comfortable you are with risk, the less emergency fund you need. But no matter what level of comfort with the risk you’re at, experts agree that everyone should save at least 3-6 months’ worth of living expenses in an emergency fund.

What is an emergency fund?

An emergency fund is money saved up that you should have for emergencies. Some people call it a rainy day fund for emergencies. Unexpected things seem to always happen at the worst time and it can be extremely stressful and expensive. If you have debt, you should definitely make sure you have some money set aside to ensure that you don’t set yourself back even more to cover the cost of an emergency.

What is an emergency fund used for?

In the event of a financial crisis or unexpected expense that you cannot cover with your monthly income or savings account balance, you need to have something to fall back on.

An emergency fund is used to cover unexpected expenses such as the loss of income due to illness and injury; car repairs after accidents that are not covered by insurance; natural disasters like floods/hurricanes etc., medical bills in cases where you don’t have health insurance, and other emergencies.

How much should you have in your emergency fund?

The amount of money to keep saved for emergencies depends on the individual’s financial situation and goals but for a starter emergency fund, it can range from $500-$1000 (or more) depending upon what their needs are.

The goal is to have enough money saved for emergencies so that you can cover the expenses without having a negative impact on your other financial goals (e,g., saving up an emergency fund before making large purchases). The amount of savings in one’s emergency fund should be at least three months worth or more (a year would be better) if possible and it will vary depending on the individual’s financial situation.

A year’s worth of savings in an emergency fund is now probably the safer option based on what we’ve seen in 2020 with the global health crisis.

When should you use an emergency fund?

You can take money from your emergency fund for any of the reasons mentioned above, but it’s best to only do so when there is no way out without using this money if at all possible! Taking money from your emergency fund just because you have it or taking it with the intention of “making it back” is not recommended. If a true emergency arises, you’ll regret not having the money.

If you have an emergency fund and are faced with the decision between paying for something or saving money in order not to be left without any funds at all; always choose what will help save more! It is better than being stuck having to borrow money from friends or family, which can cause a lot of stress and strain on relationships.

How to build up an emergency fund?

The best way to build up an emergency fund is by saving small amounts regularly- even if it’s just $20 per week! If you have the discipline for this then your savings account will grow quickly over time without any extra effort required after that.

If you don’t have the discipline to save small amounts regularly, then it’s a good idea to save any extra money whenever you can so that your savings account is not empty. If something happens that means you can no longer work or earn money (such as illness), you’ll have less money to spend so it’s best to have some money saved.

If you want, it’s possible for a family member or friend who is financially stable and has the discipline of saving small amounts regularly to be your emergency fund provider if this sounds like something that might work better than trying on your own with no support from anyone else.

Like I mentioned earlier, if you want to build your own emergency fund, it’s best if the amount is at least three months of living expenses- this will help cover any unexpected costs that might come up such as a car repair or medical bill, and allow for some breathing room in case you need time off work without pay because something happened like illness (or a new baby!).

If you’re already living paycheck to paycheck, it’s best if the amount is at least six months of your current expenses- this will help cover any unexpected costs that might come up.

Where to keep your emergency fund?

It’s best to keep your emergency fund in a savings account. This will help you avoid the temptation of using it for things like vacations or new clothes. With that being said, your emergency fund should be easily accessible but not as accessible as your everyday funds.

Ideally, you should keep your emergency fund at a different bank from your usual checking and savings accounts. Online banks like CIT Bank offer high yield savings accounts that earn great interest on your money.

If you decide to keep your emergency fund in a savings account, make sure to check with the bank about how often they charge fees. Some banks might have monthly maintenance charges that can eat into what’s leftover from an unexpected expense.

5 ways to start your emergency fund

1. Cut your expenses- this is a great way to start saving money.

Cut down on your cable bill by getting rid of the premium channels you don’t watch or cut cable all together! Try switching from an expensive phone plan with lots of data usage, for example, unlimited texting/data, etc., into one that’s more affordable (or even better, switch to prepaid) so there are no surprises.

Cut down on your grocery bill by making a list before you go to the store and sticking with it, buying only what’s needed for that week or month (and not getting tempted into impulse buys). It can also help if you buy in bulk when items are at their cheapest prices so there is less need of going back again and again.

Cut down on your car expenses by looking for cheaper insurance rates, and also make sure you’re not paying more than necessary in gas costs (by driving less or using a fuel-efficient vehicle). It can be helpful to find ways of getting around without the use of cars such as walking/biking (depedning on wheer you live) when possible so there is no need for a car.

Cut down on your utility bills by turning off lights when not in use, and unplugging electronics that are plugged into the wall (such as chargers). It can also be helpful to turn up your thermostat during colder months so there is less need for heating or cooling costs.

2. Save money on groceries by cooking at home and packing lunches.

You can also cut down on your grocery expenses by meal planning, and also make sure you’re not paying more than necessary in food costs (by eating out less or cooking at home).

Pack lunches for work or school by making a list of what you need and packing it the night before to make sure there is no waste from forgetting something at home, since buying lunch out can be costly.

3. Sell your stuff online or in person to make some extra cash.

If you have items that are in good condition and not being used, consider selling them online or at a garage sale. This is an easy way to make some extra cash without much effort on your part (such as with clothes). You can also sell things like books for textbooks if they’re still relevant but no longer needed.

4. Start a side hustle to earn more income.

This is a great way to make some extra money to build your emergency fund. Consider what you’re good at and enjoy doing, then research how to turn that into an income-generating opportunity (such as with freelance work). This is one of the best ways for people who are looking or want more money and have some free time after their day job.

5. Set up automatic transfers from your checking account to your emergency fund.

This is a great way to ensure that you’re saving for emergencies. It becomes easier to save when you don’t have to think about it. Having your money automatically deposited into your savings account will help you save for emergencies faster without having to do much work.


If you don’t have an emergency fund, you should start building one as soon as possible. Even if it’s just $20 a week to get yourself in the habit, it’s better than nothing. Open up a savings account with CIT Bank to jump-start your emergency fund. It’s better to be prepared for an emergency than to be caught off guard.

Read more: What Is The Debt Snowball Method?

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