The Rule of Thumb for Emergency Savings: How Much is Enough?

Posted On: May 11, 2023

Life is full of little and big emergencies. You never know when one might happen. If you lose your job, your car breaks down, someone in your family becomes sick, or you encounter unexpected home repairs, having the funds available to meet your needs when you need them most is essential. But how much should you have in savings to cover emergencies? Unfortunately, the answer isn't always cut and dry.

There are different opinions on how much should be set aside for emergencies. Yet, over 50% of Americans cannot cover three months of expenses in an emergency. However, there is a solution to this problem. Let’s explore it in more detail.

How Much Money Do You Need for Emergencies?

The rule of thumb is to save enough money to cover 3-6 months of household living expenses. While this might work for most people, some situations require a more robust savings account.

For example, gig workers are a rising trend in work today. This work includes freelancers, contractors, consultants, drivers, and more. Gig work is often unpredictable, with fluctuating earnings. Freelancers might earn well in some months, while others might be leaner.

However, gig workers aren't the only ones who need a more significant savings account. For example, if you:

  • are a single parent
  • have a chronic illness or health condition
  • support a disabled spouse or relative
  • have a high-risk job, or your income is unstable
  • live in a natural disaster-prone area

In these situations, a fully funded emergency savings account might mean having enough money to cover 9-12 months of expenses instead of 3-6 months.

Starting From Scratch: Beginner Goals for Saving

You're not alone if you have yet to start saving for emergencies. In fact, 25% of Americans admit to having no emergency fund at all. It’s never too late to start saving; even small steps can make a big difference over time! We've got five tips to help you begin:

1. Create a Reasonable Budget

Analyzing your income and expenses can help prevent overspending and help you find little ways to save more. By creating and sticking to a budget, you can better understand your financial situation and make informed decisions about how your money can work for you. What does a fully funded emergency account look like for your household? Do you need to cover 3-6 months of expenses or does your situation require something more robust?

2. Set Achievable Goals

Build your savings a little each month or pay period. Funding the whole thing at once or even in a year is great, but it may be challenging without the financial means.

3. Separate Emergency Savings from Regular Savings

A separate account allows you to avoid the temptation of dipping into it for non-emergency reasons. Having a separate account also makes it easier for you to track the growth of your emergency fund.

4. Automate your savings

Streamlining the process allows you to set it and forget it. Consider scheduling automatic transfers from your checking account each time you get paid, ensuring you consistently contribute to your emergency fund.

Check out our Savvy Savings program, which is a round up savings from debit card purchases to automatically be saved! 

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5. Remain Patient and Persistent

Building your emergency fund is a marathon, not a sprint. It takes time and discipline to save enough to cover several months of expenses. You won’t get there overnight, but you can reach your savings goal with patience and persistence.

How to Use Your Emergency Fund

Once you have an emergency fund, how do you know when you should and shouldn't use it? The answer depends on your life situation, but we can offer you some guidelines as to when it’s acceptable to use your emergency savings, such as:

  • unplanned job loss
  • unexpected medical bills
  • car or home repairs
  • repairs and displacement due to natural disasters
  • unplanned travel for family emergencies or last-minute business trips

Remember, though, once you've dipped into your savings to cover an emergency, it's essential to replenish the funds you used. 

Knowing the Difference: Emergency Fund vs. Emergency Fun

We recommend not allowing non-essential expenses or splurges to lower your hard-earned savings. That's why we suggest keeping emergency funds separate from regular savings.

Non-emergency expenses might include:

  • paying off debt
  • vacations or leisure trips
  • regular living expenses
  • investments and risky ventures
  • the latest phone or designer shoes

While there's nothing wrong with an occasional planned splurge, your emergency fund should never be the resource you turn to for these purchases. Instead, create a separate fund for fun purchases and avoid dipping into emergency savings for non-emergency reasons.


Life is unpredictable, and emergencies happen when you least expect them. Having an emergency fund is essential to your financial planning. You can build your emergency savings over time by creating a budget, knowing how much you need, and setting achievable goals. Remember to remain patient and only use your emergency fund for true emergencies.

By following the tips we’ve offered here, you can take control of your financial future and be prepared for whatever life throws your way.