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The offers that appear on this site are from companies that compensate us. This compensation may impact how and where products appear on this site, including, for example, the order in which they may appear within the listing categories. But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. SHARE: G-Stock Studio/Shutterstock January 12, 2022 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. Kevin Payne is a freelance writer focused on the personal finance and travel spaces. He frequently writes about credit cards, banking, student loans, insurance, travel rewards and more. He is also the personal finance expert behind Family Money Adventure, where he regularly shares practical advice on managing family finances and traveling with a family. David Schepp is a wealth editor for Bankrate, focusing on deposits and consumer banking content. Chloe Moore, CFP, is the founder of Financial Staples, a virtual, fee-only financial planning firm based in Atlanta and serving clients nationwide. Bankrate logo

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Scenarios when you might want more emergency savings

Saving several months’ worth of earnings seems like a daunting task. When discussing building an emergency fund, keep in mind that we’re talking about saving up for living expenses, not replacing your entire income. So, if your monthly expenses add up to $2,500, you’ll need to save $7,500 to reach three months of emergency savings. There are times, however, when you might want to continue saving beyond experts’ recommendations. You have no job stability: If you lack job stability or work in a high-risk industry, you may want to save even more. You are self-employed: If you work for yourself, having a large emergency fund can help you get through times of fluctuating income throughout the year. You are retired: Having adequate savings is key if you’re retired and much of your income comes from your investments accounts. You have medical issues: If you’re dealing with medical issues that may require surgery or ongoing medical care, saving beyond the norm can help bridge the gap when insurance doesn’t cover all of your medical bills. Uncertainty in your life: Unexpected emergencies are a part of life, but there are times you may be more vulnerable to added costs. If you drive an older, unreliable car or know your home will need some large repairs down the road, having extra savings can protect you in the long run. For single parents with kids at home and no secondary source of income, saving money can provide some peace of mind to know they are cared for regardless of what happens. There’s an economic crisis: Global and national events like a recession or a pandemic are out of your control. During times like these, it’s always nice to know you have money saved to cover the unexpected.

Scenarios when you might want less emergency savings

Below are some times when you may buck traditional advice and carry leaner emergency savings. You have few expenses relative to your income: Depending on your situation, you may not have very many living expenses. Maybe you don’t own a home or car, or they are paid off already. If your living expenses take up only a small portion of your income, you may be fine with a smaller emergency fund. You have no dependents: Having children and other dependents often means higher expenses and more responsibility. You have to make sure you’re covered if something happens and you’re unable to work or provide for your family. If you have no dependents, though, you don’t need to save as much money for others’ living expenses too. You’re have credit card debt: If you have high-interest credit card debt, you’re better off building a small emergency fund and putting the rest of your money toward getting out of debt. It doesn’t make sense to continue to put money in a bank account that earns little interest when your credit card bills continue to grow from . It’s important to decide how lean your emergency fund should be in this case. You don’t want a large, unexpected expense to pull you back into debt. You want to build retirement savings instead: Even the best and typically top out at 0.6 percent APY. While these types of accounts are great vehicles for keeping an emergency fund, your savings may not keep up with inflation over time. You might be better off setting a personal savings goal and putting anything above that amount into a . If your employer offers a with a company match, contribute enough to take full advantage of free money for retirement savings. You’ll also lower your taxable income.

You ultimately decide how much emergency savings is best for you

Personal finance is personal. What might be right for one person may not be the best option for another. It’s good to listen to financial experts and understand why they advocate saving a certain amount, but ultimately the only thing that matters is whether you’re comfortable with your emergency savings. That could mean two years or two months of emergency savings, depending on your goals. As long as your savings doesn’t sabotage other financial goals, set aside whatever you need to avoid worrying about paying for the unexpected. If you’re not covered as much as you’d like, create a savings plan to get you there, even if it means starting slow with $10 to $100 a month. and monthly income to determine how much you need for living expenses and how much you can save and invest in other areas of your life, like emergency savings.

Learn more

SHARE: Kevin Payne is a freelance writer focused on the personal finance and travel spaces. He frequently writes about credit cards, banking, student loans, insurance, travel rewards and more. He is also the personal finance expert behind Family Money Adventure, where he regularly shares practical advice on managing family finances and traveling with a family. David Schepp is a wealth editor for Bankrate, focusing on deposits and consumer banking content. Chloe Moore, CFP, is the founder of Financial Staples, a virtual, fee-only financial planning firm based in Atlanta and serving clients nationwide.

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