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emergency fund

How Much Should I Save in My Emergency Fund?

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More than half of Americans don’t have enough savings to cover a $1,000 emergency, according to a survey conducted by Bankrate in early 2022. But accidents happen all the time, and it’s important to try to be financially prepared for the unforeseen as much as possible. Having a savings account with a few months’ worth of living expenses could be the difference between a minor inconvenience and years of debt and high-interest payments that derail your financial goals indefinitely.

So, how much emergency fund planning do you need to do? Ultimately it depends on your specific situation, but stashing away three to six months’ worth of your current monthly income can help cushion you against job loss or a significant, unexpected expense. What does that mean for you, and how can you meet that savings goal? Let’s dig in.

What should an emergency fund cover?

Your emergency fund offers you peace of mind on the best of days and can protect you from financial ruin on the worst. In short, it’s your own personal insurance protecting your lifestyle and your dependents from job loss, surprise medical bills, emergency home repairs, or other costly, unexpected events.

When the pandemic led to massive waves of layoffs in early 2020, for example, many people without sufficient emergency savings struggled to pay rent and bills, even with stimulus payments and unemployment insurance. This had a ripple effect on the workforce as a whole: as people spent less, other jobs were affected, too.

Everyone’s emergency fund amount is different—everyone has different needs, obligations, and a different set of benefits from their employer that can help mitigate the impact of some unexpected events, such as accidents or trauma. Ideally, your fund should have enough money to cover things like:

  • All of your monthly bills, including:
    • Your rent or mortgage payment
    • The cost of your utilities, including electricity, gas, water, wifi, heat, cell phone bills and other necessities
    • Your student loan payments
    • Your monthly credit card bills
    • Medical debt
    • Your car payment and car insurance
    • Childcare costs if your kid attends daycare or a private institution
  • Enough money for necessities, including:
    • Gas for your car and expected maintenance, like an oil change, annual registration fee, or a license renewal
    • Groceries
    • Health care costs, including ongoing prescriptions, physical therapy appointments, mental health care such as therapy, etc.

You can figure out how much you should have in your bank account for emergencies by adding up all these fixed costs and multiplying by the number of months you’d like to save for. In an ideal situation, an emergency fund would include enough money to maintain your lifestyle without needing to drastically cut back—meaning, an ideal rainy day fund would include savings to cover your yoga membership or your weekly date night.

But that’s an ideal situation and it’s not realistic for everyone. So if you’re starting from zero, only include the absolute necessities in your calculation. In other words, your emergency fund is for, well, emergencies. Would you keep paying for your streaming subscriptions or meal kit delivery service in the event you lost your job and had to survive off savings? If not, it doesn’t go on the list—and it should get canceled or paused as soon as possible in the event you experience a financial emergency.

When you’re calculating how much you need to have in your savings account, take a look at each of your debt payments individually and take note of the required minimum payment on each account versus how much you’re currently paying. It’s generally best to pay more than the minimum whenever you can, to pay down your principal balance faster and reduce the amount of interest you pay over time.

In an emergency situation, however, you may have to settle for making the minimum payments. It’s vital to make sure you don’t default or miss a payment to a lender, which could have a drastic impact on your credit score for many years to come.

How much should I save in my emergency fund?

How many months of expenses you save up in your emergency fund depends quite a lot on your circumstances, such as whether you have a stable job or are self-employed; your personal finance habits and goals; and what other funds might be available to you in the event of an absolute emergency, such retirement savings.

Before we dive in a bit deeper, you might be wondering why you’d only want to have a couple of months’ worth of expenses saved up rather than continuing to save and having, say, five years’ worth of income in a checking account.

Ultimately, it comes down to financial planning. Even if you have your emergency fund in a high-interest, FDIC-insured money market account, you likely won’t see as significant returns over time as you would if you had invested that money.

So, even if you can have a year’s worth of cash in a high-yield savings account, it might actually be better for your financial goals to keep most of that money elsewhere, where it’s less accessible—such as in bonds, stocks, or a CD or certificate of deposit account—but where you’ll see higher interest rates or return on investment.

So, let’s take a look at a few different scenarios.

When 3-4 months’ of expenses may be enough

Some or most of the following things apply to you, three to four months’ worth of expenses might be all you need to weather a storm:

  • You have a stable job and/or work in a field where it’s generally easy to find a new job if you were to lose yours
  • Your student loans have protections enabling you to suspend them temporarily as a result of an emergency, or to skip a payment1, as Earnest allows borrowers in good standing
  • You have a partner or family you can rely on in the event of an emergency
  • You live in a place with a relatively low cost of living
  • You don’t have significant student loan debt, credit card debt, or other bills
  • You’re in good health
  • You use public transportation and don’t have a car or insurance payment
  • You have a good car and aren’t likely to have an unexpected or significant car repair
  • You rent a home and aren’t likely to have significant unexpected expenses relating to home repairs
  • You don’t have pets, children, or other dependents
  • You have insurance that would cover some or all of your expenses in the event an accident or illness renders you temporarily unable to work

When around 6 months’ of expenses may be enough

  • You don’t have a partner or family member(s) who can support you in the event of an emergency
  • You live in a city with a higher cost of living
  • You own your home and have a mortgage and/or you own a rental property for which you’re responsible for home repairs
  • You don’t have a retirement account or other investments you can sell in the event of a true emergency
  • You’re financially responsible for a partner, children or other dependents, and/or pets
  • You have ongoing medical expenses or significant medical debt
  • You have significant student loan or credit card debt
  • You’re self-employed or your job is seasonal or unstable, or your income is inconsistent
  • Your hobbies or line of work regularly put you at risk for accidents. For example, if you work in construction zones, a warehouse, or you paraglide or ski regularly

When a year’s worth of expenses is recommended

  • You’re expecting or trying for a child and planning to take leave
  • You have a high income and it’s relatively easy for you to put this much aside for peace of mind
  • You’re the sole source of income in your family
  • Your job would be difficult to replace in the event you’re laid off or need to change jobs for some other reason, such as needing to move home to care for a family member,  or switching careers because of an accident impacting your physical ability to do your job
  • You often have unexpected expenses, such as a child who regularly needs medical care
  • You have significant debt you can’t easily restructure in the event of an emergency
  • You don’t have other family or resources you can rely on for help

How to calculate my emergency fund

Reviewing the lists above, take stock of your career, your lifestyle, and your regular expenses. Consider how much risk you have— how stable is your job? How good is your health? How many non-negotiable bills and expenses do you have? Try to calculate what you need with a bit of cushion when possible—round up, not down, and calculate based on your current expenses as they are.

For example, let’s say you make $60,000 a year in take-home pay, after taxes, and your regular monthly expenditures are as follows. We’ve marked essential categories in bold—necessities and payments you have to keep making even if you were to lose your job—and discretionary, or optional, expenditures italicized:

  • Rent: $1,500
  • Groceries: $300
  • Student loans: $350
  • Utilities (cell phone, wifi, electricity, etc.): $250
  • Car payment: $300
  • Car insurance: $100
  • Gas: $200
  • Restaurants and entertainment: $250
  • Investments: $250
  • Health insurance: $200
  • Emergency savings: $200
  • Streaming (Netflix, Spotify): $25

In this example, our monthly payments total $3925. We’ve marked emergency savings and investments—such as retirement savings—as optional. If you’re dipping into your savings for an emergency, you likely won’t have spare cash to add right back to the fund, and it may be wise to pause new investments until you have stable income flowing in again.

By this example, essential expenses come out to $3,200 per month. Optional, discretionary spending—dining out, post-work drinks, streaming services—comes to $725. In the event of an emergency, you could do without that spending

Here’s how much you’d need to save for an emergency fund to cover your essentials:

  • One month of expenses: $3,200
  • Three months of expenses: $9,600
  • Four months of expenses: $12,800
  • Six months of expenses: $19,200
  • One year of expenses: $38,400

The more you’re able to save, the more prepared you’ll be for an unexpected expense or layoff, and the less likely you’d need to borrow new money to cover the bills.

Ideally, you won’t need exactly as much as you’ve saved. For example, if you were to lose your job, you may be able to save a few extra dollars each month by downsizing your phone data package, canceling your wifi and working from a library instead, shopping at a less expensive grocery store, or carpooling or using public transit. You’ll save yourself quite a lot of stress if your emergency fund has a bit of breathing room, though, so try to save a bit more than just the bare bones if it’s possible for you.

Tips on building an emergency fund

Building an emergency fund takes time, especially if your goal is to save for a whole year’s worth of expenses. But it’s OK that you don’t have all of it right now. Even just a few hundred dollars can help save you from paycheck-to-paycheck stress, and the more you save, the more peace of mind you’ll create.

Here are some ways you can save more quickly and strategically:

  • Calculate the amount of money you need—one month of expenses multiplied by the number of months you’d like to save—set the goal and regularly evaluate how far you’ve come.
  • Adjust this goal as needed, such as if you refinance your student loans or mortgage and your monthly expenses go down, or if fixed costs like therapy appointments, medicine, or rent increase.
  • Set up a high-yield savings account that’s not too easy or tempting to use for non-emergency purposes like a big sale on a non-essential trip or indulgence.
  • Automate your savings. Calculate how much you can afford to save each month and setting up an automatic transfer between your checking account and a designated savings fund exclusively for emergency use.
  • Refinance your student loans2 to reduce your monthly bills and/or long-term expenditures so you can direct more money to your savings account.
  • Direct any unexpected or extra income—such as a stimulus payment, tax refund, or cash birthday gift—into your emergency fund.
  • Take on a second job or start a side hustle with low- to no-upfront investment cost to make and save extra money.

How Earnest can help your emergency fund

You may be able to save a significant amount of money—thousands of dollars or more—by refinancing your student loans for a lower interest rate. Refinancing for a lower rate allows you to put more of your monthly payment toward the principal balance of your loan, saving you money on interest over time.3

Earnest offers some of the lowest rates around for student loan refinancing, and allows you to choose a repayment period and monthly payment that work best for your financial goals. And as a bonus? Earnest even lets borrowers in good standing request to skip a payment once a year. So in the event that an unexpected expense throws off your monthly budget, you can have a bit of extra peace of mind that you might not even need to dip into that emergency fund at all while you’re building it.

The more you save with refinancing, the more you can put toward your emergency fund, and the less stress you’ll face in the event of an emergency. See how much you could save by checking your rate today. It’s free, takes just two minutes, and doesn’t impact your credit score.




1 Earnest clients may skip one payment every 12 months. Your first request to skip a payment can be made once you’ve made at least 6 months of consecutive on-time payments, and your loan is in good standing. The interest accrued during the skipped month will result in an increase in your remaining minimum payment. The final payoff date on your loan will be extended by the length of the skipped payment periods. Please be aware that a skipped payment does count toward the forbearance limits. Please note that skipping a payment is not guaranteed and is at Earnest’s discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.

2 Loan Eligibility criteria: Your debt is from paying for education at a Title IV accredited school. The debt is from your education or your child’s. The debt you’re refinancing is for a completed degree or one that will be completed at the end of this semester. You are currently the primary borrower on the student loans you would like to refinance, and you will remain the primary borrower after refinancing. You must reside in the District of Columbia or one of the 47 states Earnest Operations LLC is authorized to lend in (all but Delaware, Kentucky, and Nevada). This is strictly a student loan refinance product. There is no opportunity to borrow more than your outstanding qualifying student loan amount. You must be the age of majority in your state or older at the time you apply, as well as be a United States citizen or Permanent Resident Alien without conditions. Refinancing is subject to credit qualifications. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX.

You may lose benefits associated with your underlying federal and/or private loans if you refinance such as federal Income-driven Repayment Plans, Economic Hardship Deferment, Public Service Loan Forgiveness, or other deferment and forbearance options. If you file for bankruptcy, you may still be required to pay back this loan.

3 Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for total cost of your refinanced loan.

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

Earnest Loans are made by Earnest Operations LLC. Earnest Operations LLC, NMLS #1204917. 535 Mission St., Suite 1663, San Francisco, CA 94105. California Financing Law License 6054788. Visit for a full list of licensed states. For California residents: Loans will be arranged or made pursuant to a California Financing Law License.

 Earnest loans are serviced by Earnest Operations LLC with support from Navient Solutions LLC (NMLS #212430). Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America.

 © 2022 Earnest LLC. All rights reserved.

Conquer your student debt. Refinance now.

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Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.