Life can throw any number of surprises your way, and some of those surprises could cost you financially. To prepare, you may want to have an emergency fund, which is a reserve of money that won't be touched unless you're facing the unforeseen. Things like illness, loss of employment, accident or injury, and home or car repairs are where you'd use these reserves to help you through.
To know how much you should have in this fund, carefully examine your finances as a whole, along with other details that make up your life and lifestyle. Here are some ways to know if your emergency fund is enough, and a few ideas to help your savings work best for you.
Consider your monthly costs
/images/2022/03/21/man_sitting_at_kitchen_table_in_front_of_open_laptop.jpg)
An emergency fund isn't just to pay for the emergency itself, but the fallout you may incur as a result. For example, if you can't work as a result of the emergency, you could still have a cushion to get you through.
Take a look at your monthly costs — rent or mortgage, groceries, utilities, and credit card bills. Once you get a general number for your monthly costs, multiply it by the months you'll want to cover. A good rule to have for your emergency fund is to keep about three to six months' worth of those costs on hand.
Don't forget your income
/images/2022/03/21/happy_asian_woman_using_the_computer_at_home.jpg)
Factor your income into your calculations because it can help you decide how much you can set aside in your budget for your fund. An emergency fund may take some time to build up, so look at your income when deciding how much you're comfortable saving each month for an emergency fund. If you have a higher income, you may want to consider saving a little more and perhaps try to cover closer to six months of expenses in your emergency fund.
Count your dependents
/images/2022/03/21/happy_family_having_fun_in_summer_park.jpg)
If you're a parent, calculate how much you spend on your kids each month. Include day care or preschool expenses, after-school activities, and sports or club fees. Don't forget older dependents like a parent who may be getting financial assistance from you. And remember your furry friends. Dogs and cats require food and medical care, so you may want to have your emergency fund cover them.
Look at your lifestyle
/images/2022/03/21/two_guys_eating_pizza_and_drinking_beer_at_home.jpg)
Your own spending habits may also be accounted for when considering your emergency fund. If you enjoy going out with friends on a regular basis or spend money on big-ticket items like the latest phone, you should factor that into calculations. Also think about what you can and can't forgo if you need to dip into your emergency fund. If you don't mind skipping dinner out, then don't include that in your fund. On the other hand, if there are things you still want to have covered by your fund, consider adding some extra cash to cover those expenses.
Consider how to save for your emergency fund
/images/2022/03/21/african_woman_with_papers_and_calculator_at_home.jpg)
After looking at your expenses, your next step is to save money within your budget. Think about other expenses that you would like to cover each month and which ones you can cut if needed. Perhaps you can lower your credit card bill or pay off any existing debt. Or you may want to put money into a retirement fund or 401(k) before you save money for an emergency fund. It's good to factor in these non-emergency costs because it could set a specific amount for your emergency fund to help you stick with your budgeting goal and save money on a regular basis.
Trending Stories
Be smart about where to put your emergency fund
/images/2022/03/21/young_man_using_laptop_computer_at_home.jpg)
One of the most important factors to consider when deciding where to put your emergency fund is liquidity. You'll want to have that money available immediately when an emergency arises. Think about using one of the best savings accounts for an emergency fund like this. It will allow you to earn interest on the money you're saving while still being able to pull cash out quickly if you need it. And if you have it earmarked in a savings account, it may be less tempting to use it for other expenses than if you had it in a checking account.
You may also want to consider having a prepaid card that you add money to. Then set the card aside in a safe place and only take it out if you need it for an emergency. And of course, you can also have some cash set aside at home as well in case you need it on hand for any expenses.
Know when to use your emergency fund
/images/2022/03/21/insurance_agent_review_the_damage_of_the_car_after_accident.jpg)
Remember to set some limits for yourself about what is and isn't an emergency. A car accident or losing your job are good reasons to use the fund. Even an unexpected co-pay at a doctor's office might make you dip into the savings. It may be tempting to see that large chunk of money you worked so hard to save and spend it on non-emergency items instead. Setting clear goals now for that cash could help prevent you from spending it later. That being said, don't be afraid to use it if you need it.
Bottom line
/images/2022/03/21/single_mother_working_from_home_with_preteen_daughter_around.jpg)
An emergency fund is a good thing to have during good economic times and bad economic times. Talk to your bank about them about the different ways you can start saving now for surprise expenses later. You never know when you may need a little bit of help to cover unexpected expenses or your typical monthly bills.
FinanceBuzz writers and editors score products and companies on a number of objective features as well as our expert editorial assessment. Our partners do not influence our ratings.
SoFi Checking and Savings Benefits
- Earn up to 3.80% APY1 <p>New and existing Checking and Savings members who have not previously enrolled in Direct Deposit with SoFi are eligible to earn a cash bonus of either $50 (with at least $1,000 total Direct Deposits received during the Direct Deposit Bonus Period) <b>OR</b> $300 (with at least $5,000 total Direct Deposits received during the Direct Deposit Bonus Period). Cash bonus will be based on the total amount of Direct Deposit. Direct Deposit Promotion begins on 12/7/2023 and will be available through 1/31/2026. See full bonus and annual percentage yield (APY) terms at <a href="http://www.sofi.com/banking#1">sofi.com/banking#1</a>. SoFi Checking and Savings is offered through SoFi Bank, N.A., Member FDIC.</p> <p>SoFi members who enroll in SoFi Plus with Direct Deposit or by paying the SoFi Plus Subscription Fee every 30 days or with $5,000 or more in Qualifying Deposits during the 30-Day Evaluation Period can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. Members without either SoFi Plus or Qualifying Deposits, during the 30-Day Evaluation Period will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Only SoFi Plus members are eligible for other SoFi Plus benefits. Interest rates are variable and subject to change at any time. These rates are current as of Jan. 24, 2025. There is no minimum balance requirement. Additional information can be found at <a href="http://www.sofi.com/legal/banking-rate-sheet">http://www.sofi.com/legal/banking-rate-sheet</a>. See the SoFi Plus Terms and Conditions at <a href="https://www.sofi.com/terms-of-use/#plus">https://www.sofi.com/terms-of-use/#plus</a>.</p> and collect up to a $300 cash bonus with direct deposit or $5,000 or more in qualifying deposits2 <p>SoFi members who enroll in SoFi Plus with Direct Deposit or by paying the SoFi Plus Subscription Fee every 30 days or with $5,000 or more in Qualifying Deposits during the 30-Day Evaluation Period can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. Members without either SoFi Plus or Qualifying Deposits, during the 30-Day Evaluation Period will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Only SoFi Plus members are eligible for other SoFi Plus benefits. Interest rates are variable and subject to change at any time. These rates are current as of Jan. 24, 2025. There is no minimum balance requirement. Additional information can be found at <a href="http://www.sofi.com/legal/banking-rate-sheet">http://www.sofi.com/legal/banking-rate-sheet</a>. See the SoFi Plus Terms and Conditions at <a href="https://www.sofi.com/terms-of-use/#plus">https://www.sofi.com/terms-of-use/#plus</a>.</p>
- No account, overdraft, or monthly fees3 <p>We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at <a href="http://sofi.com/legal/banking-fees/">sofi.com/legal/banking-fees/</a></p>
- Get your paycheck up to two days early4 <p>Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.</p>
- Access additional FDIC insurance up to $3 million5 <p><b style="font-family: Rubik, -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, "Helvetica Neue", Arial, sans-serif;">SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per depositor per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $3M through participation in the program. See full terms at <a href="http://sofi.com/banking/fdic/sidpterms">SoFi.com/banking/fdic/sidpterms</a>. See list of participating banks at <a href="http://sofi.com/banking/fdic/participatingbanks">SoFi.com/banking/fdic/participatingbanks</a>.</b></p>
FinanceBuzz writers and editors score products and companies on a number of objective features as well as our expert editorial assessment. Our partners do not influence our ratings.
Subscribe Today
Unlock the Best Banking Deals and Bonuses
From high-yield savings accounts to cashback checking and sign-up bonuses, we bring you the best banking offers to grow your money smarter.