How Much Emergency Savings Do You Need? Quick: Name Your Top 5 Monthly Expenses

Emergency funds piggy bank

Think of the last time you got that unexpected bill: the $500 car repair, a heart-skipping co-pay, a downed tree from a storm.

How did you manage?

If you’re like 63% of Americans, you didn’t have the money in savings for this unexpected expense. It’s likely your credit card took (and might still be taking) the blow. And when it comes to surviving truly crippling financial hardship like job loss or disability, less than half of those surveyed said they had enough in the bank to cover just 3 months of major expenses.

That’s scary news when you’re out of a job. While the employment rate has improved in the past 5 years, job seekers will still average anywhere from 6 weeks to a few months before landing their next job. And many will take a wage cut to get there.


Sure, taking the initiative to set aside money for hard times is arguably less inspiring than contributing to vacation and holiday funds. But when “life happens,” the reward is monumentally greater. By accumulating a sufficient emergency fund today, you alleviate a great deal of the financial stress that accompanies these and other emergencies:

  • Job loss
  • Medical bills
  • Major illness and disability
  • Unexpected car and home repairs
  • Travel and other expenses related to funerals and other family emergencies


Unlike, say, your retirement savings, an emergency fund is money you have stashed somewhere accessible and stable, like a savings account or a certificate of deposit (CD).


While your ideal emergency fund is unique to your needs, the formula is the same for everyone.

At minimum, every household should set aside 3 to 6 months’ worth of its major expenses [see: WHAT’S A MAJOR EXPENSE?]. Ideally, you could afford to live on your savings for up to a year.

You may be surprised how quickly major expenses add up in just 3 months. Consider $1,500 in housing, $500 in health insurance, another $500 in groceries and phone bills and you’re already looking at needing $7,500 in savings for a 3-month cushion.  For many, education costs, loans and car payments tack on another $500 per month.

While this reserve is intended to keep you afloat should your income suddenly grind to a halt, it can also serve as a fund to dip into when the furnace goes out. The goal is to keep you from turning to creditors, borrowing from family or dipping into your retirement account.

But remember: you’re still in debt to your future self. The key to a stress-free future is to replenish the pot just as soon as you’re back on your feet.


Rent or mortgage
Property taxes
Renters or home insurance
Household products and supplies

Food and beverages
Baby formula
Pet food / supplies


Remember: If you lose your job, you may be able to stay on your former employer’s health plan for up to 18 months, but you’ll spend a lot more on that same insurance.

Medical insurance
Dental insurance
Monthly prescriptions and other co-pays

Child Care or Tuition:
If you are paying for a child’s college or private school, make sure you have enough saved up to cover potential disability or job loss. Some school loan providers will let you defer payments in the event of an emergency.

Child care
Tuition for children’s school or college
Student loans

Car payments
Credit Cards
Home improvement loans

Cell phone
Cable / Internet