The car breaks down. You lose your job. A medical bill arrives. Life is expensive and unpredictable. An emergency fund isn't just money; it's peace of mind.
What's Your Safety Number?
Calculate exactly how much you need for 3-6 months.
How Much is Enough?
Financial experts generally recommend saving 3 to 6 months of essential expenses. Note the word "essential." This covers rent/mortgage, food, utilities, and insurance—not Netflix and dining out.
- 3 Months: If you are single, rent your home, and have a stable job.
- 6 Months: If you have a family, own a home, or have varied income.
- 12 Months: If you are a freelancer or work in a high-risk industry.
Where Should You Keep It?
Do NOT keep your emergency fund in your checking account. It's too easy to spend. Instead, open a High-Yield Savings Account (HYSA).
A HYSA keeps your money separate (out of sight, out of mind) but accessible within 1-2 days. Plus, you'll earn 4-5% interest (in 2025 rates) compared to 0.01% in a regular bank.
Steps to Build it Fast
- Start Small: Aim for $1,000 first. This covers most minor emergencies like a tire blowout.
- Automate: Set up a direct deposit of $50-$100 per paycheck into your HYSA.
- Sell Unused Items: Use Facebook Marketplace or eBay to turn clutter into cash.
- Audit Subscriptions: Cancel streaming services you don't use and redirect that cash.