Emergency Fund: How Much to Save & Where to Keep It
An emergency fund is money set aside for unexpected expenses like job loss, medical bills, or car repairs. Here is how much you need, where to keep it, and how to build one.
How Much Do You Need?
The standard recommendation is 3 to 6 months of essential expenses. Not your full income, just the expenses you cannot skip: rent/mortgage, food, utilities, insurance, transportation, and minimum debt payments.
| Monthly Expenses | 3-Month Target | 6-Month Target |
|---|---|---|
| $3,000/mo | $9,000 | $18,000 |
| $4,000/mo | $12,000 | $24,000 |
| $5,000/mo | $15,000 | $30,000 |
| $7,500/mo | $22,500 | $45,000 |
When to Save More Than 3 Months
- •Self-employed or freelance — income is less predictable, aim for 6-12 months
- •Single income household — no backup earner if you lose your job
- •Specialized career — finding a comparable job may take longer
- •Homeowner — unexpected repairs can cost thousands
- •Health concerns — medical expenses can escalate quickly even with insurance
Where to Keep Your Emergency Fund
Best: High-Yield Savings Account
- •FDIC insured up to $250,000
- •Top rates currently 4.40% APY
- •Withdraw anytime with no penalty
- •Money available in 1-2 business days
Avoid for Emergency Funds
- •Stocks/ETFs — can lose value when you need it most
- •CDs — early withdrawal penalties reduce your balance
- •Regular checking — earns little to no interest
- •Cash at home — not insured, no interest, risk of loss/theft
Top HYSA Rates for Emergency Funds
How to Build Your Emergency Fund
- 1.Start with $1,000
This covers most common emergencies (car repair, appliance replacement, medical copay) and gives you a foundation to build on.
- 2.Automate your savings
Set up an automatic transfer from checking to your HYSA on each payday. Even $100/week builds to $5,200 in a year.
- 3.Use windfalls
Direct tax refunds, bonuses, and side income straight to your emergency fund until you hit your target.
- 4.Keep it separate
Use a different bank from your daily checking so you are less tempted to dip into it. Online HYSAs work well for this since transfers take 1-2 days.
- 5.Replenish after using it
If you dip into your emergency fund, make rebuilding it a priority before resuming other savings goals.
How Much Can Your Emergency Fund Earn?
At 4.40% APY, here is what your emergency fund earns in interest over one year:
Frequently Asked Questions
How much should I have in my emergency fund?
Most financial experts recommend saving 3 to 6 months of essential expenses. If you have a stable job and dual income, 3 months may be enough. If you are self-employed, have variable income, or are the sole earner, aim for 6 months or more.
Where should I keep my emergency fund?
A high-yield savings account is the best place for an emergency fund. It is FDIC-insured, earns interest (top rates are currently 4.40% APY), and you can access your money within 1-2 business days. Avoid investing your emergency fund in stocks or locking it in CDs.
Should I invest my emergency fund?
No. An emergency fund needs to be liquid and stable. Investing in stocks risks losing value right when you need the money most. A high-yield savings account gives you guaranteed returns with no risk to your principal.
How do I start building an emergency fund?
Start with a goal of $1,000 for immediate emergencies, then build toward 3-6 months of expenses. Set up automatic transfers from your checking to a high-yield savings account each payday. Even $50-100 per week adds up to $2,600-5,200 per year.
Is $10,000 enough for an emergency fund?
It depends on your monthly expenses. If your essential expenses are $3,000/month, $10,000 covers about 3.3 months, which is a solid start. If your expenses are higher, you may need more. The right amount is based on your personal spending, not a fixed dollar amount.