How Much Emergency Fund Should You Have Saved? Our Top Tips to Prepare for the Unexpected

Emergencies can happen to anyone—whether it’s a layoff, a sudden illness, or an unexpected expense you weren’t budgeting for. Having money set aside in an emergency fund is the best way to cover periods of reduced or no income and pay for irregular expenses, without having to take out a high-interest and potentially predatory emergency loan.

But how much money do you need in your emergency fund, and how can you speed up the saving process, especially if you live paycheck to paycheck? I’ll answer these and other emergency fund questions below.

Table of Contents

1. How much do you need in your emergency fund?
2. 5 tips for building an emergency fund
3. When to use an emergency fund
4. Debt repayment vs. emergency savings

How much do you need in your emergency fund?

Most experts agree you need between three and six months’ worth of expenses saved in an emergency fund. Given current inflation rates, mass layoffs, and overall economic uncertainty, I recommend aiming for the full six months, if possible.

But what does it mean to save three to six months’ worth of expenses? Essentially, your emergency fund should have enough money to cover all your non-negotiable expenses for that period, without any new income.

What expenses to include in your calculation

If you look at your expenses over the last few months, you’ll see a mix of non-negotiable expenses, like rent or mortgage payments, and discretionary expenses, like fast food. When calculating how much your emergency fund needs, you only need to account for those non-negotiable expenses.

Everyone’s budget looks different, but here are some common expenses to include in your emergency fund calculation:

• Rent or mortgage
• Insurance (car, health, homeowners, or renters)
• Groceries
• Utilities
• Internet and cellphone
• Medication
• Transportation (gas, public transit, car payment)
• Debt repayments (student loans, credit cards, personal loans)
• Pet care

In a true emergency, you should give up discretionary spending until you have steady income and have paid off all major expenses. Some of those discretionary expenses include:

• Dining out
• Streaming services
• Gym memberships
• Tickets (movie, concert, theme park, and sporting events)

You should even pause what would otherwise be deemed responsible expenses, such as extra principal-only payments on a loan or retirement contributions, until you have stable income.

How to reduce non-negotiable expenses in an emergency

After eliminating discretionary expenses in an emergency, you should focus on reducing your non-negotiable expenses however you can. The more you can reduce your spending, the longer your emergency fund will last.

Here are a few ways to reduce those costs:

• Reduce your auto insurance coverage or switch to a new insurer.
• Sell an expensive vehicle you’re financing and buy an older used car with cash.
• Sell your family’s second vehicle if you’re a two-car household.
• Look into student loan deferment if you’re unemployed.
• Clip coupons and buy generic brands at the grocery store.
• Ask your landlord whether you can trade services to lower your rent.
• Ask your doctor to switch you to a comparable, more affordable prescription.
• Keep the heat lower in the winter, or the AC higher in the summer, to reduce utility bills.

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Building an emergency fund requires discipline and the willingness to say no to certain financial requests—whether it’s helping others, going out, or making impulse purchases. Your present self is investing in your future well-being.

During this phase, when you receive a lump sum of money (like a tax refund, birthday gift, etc.), resist the urge to spend it. Instead, prioritize directing those funds to your emergency fund. Trust me, your future self will be grateful for the choice you made today.

5 tips for building an emergency fund

Saving up enough cash to cover three to six months’ worth of expenses can feel daunting, especially if you’re starting from scratch. Don’t let this discourage you from trying. Instead, take a step-by-step approach. Even saving $10 a week can make a difference.

Here are our tips to save money and build your emergency fund as fast as possible:

1. Open a high-yield savings account

A high-yield savings account (HYSA) is one of the best and easiest ways to grow your savings faster.

Some of the biggest banks in the U.S.—Chase, Bank of America, and Wells Fargo, for instance—have insultingly low interest rates on savings accounts: 0.01%. The national average (as of March 27, 2025) is 0.41%, for comparison.

But you can open a HYSA at an online bank, such as SoFi, Capital One, Ally, or Discover, and earn upward of 4.00% annual percentage yield (APY) on your savings. That means you earn 4% back on the balance in your savings account—400% more than those big banks offer. 

Can’t picture how big of a difference this would make? The table below shows how much an initial deposit of $500 would grow at a bank offering 0.01% APY vs. 4.00% APY, without additional contributions.

How $500 savings grows based on 0.01% vs. 4.00% APY

Time (years)	Earning 0.01% APY	Earning 4.00% APY
1	$500.05	$520
2	$500.10	$540.80
3	$500.15	$562.43
4	$500.20	$584.93
5	$500.25	$608.33

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What this means:

If you put $500 into a savings account earning 0.01% APY and didn’t touch it for five years, you’d have $500.25 at the end. If you put it in a high-yield account earning 4.00% APY instead, you’d have more than $608 at the end.

2. Automate your savings

Remembering to put money into savings—whether you do it every month, every week, or every time you get paid—can be tough. If you’re worried it’ll slip your mind, see whether your bank offers recurring transfers from your checking account to your savings account.

Some financial institutions offer cool savings features that automatically deposit a portion of your paycheck into savings or round up to the nearest dollar every time you swipe your debit or credit card (and put that spare change into savings).

3. Get a side gig or second job

Increasing your income is another easy way to expedite growing your emergency fund. If you can use your main job to pay bills, manage debt, and save for retirement, you can take every cent you make from a second job or side hustle and put it into your emergency fund.

4. Cut some discretionary spending

New video games, trips to the nail salon, fast food on the way home from work—it’s important to treat yourself now and then. But if you make many discretionary purchases on things you don’t need, you’ll struggle to build your emergency fund.

Try cutting something as simple as one $20 meal out each week and putting that money into a HYSA instead. In a year, you’d have $1,040, plus interest.

5. Save your windfalls

Getting a big tax refund, money from grandparents on your birthday, or a bonus at work is exciting. It feels like “free money” to spend on a weekend getaway, a fancy dinner, or a new TV.

Instead, put that money in your HYSA to help reach your goal number for your emergency fund.

When to use an emergency fund

Emergency funds aren’t for vacations, weddings, or even down payments on a house. Build your emergency fund first, and then you can start saving separately for other big purchases.

So when should you use your emergency fund? Here are a few scenarios when I recommend withdrawing money:

• Minimum debt repayment: If you don’t have enough money to make the minimum payments on your debt, borrow some from emergency savings. Missing a loan payment will result in late fees and possible damage to your credit score.
• Financing common purchases: If you can’t afford gas for your car, food for your family, or school supplies for your kids—and you’re going to put the purchase on a high-interest credit card with no plan for how you’ll repay it—reach into your savings instead. Just make a plan for how you’ll grow your emergency fund back to where it was before the withdrawal.
• Moving: If you are in a dangerous situation—an abusive partner, an oppressive family, or in a city or state lacking basic human rights—get out however you can. Take out a moving loan if needed, but if you have the money in an emergency fund, use it. Nothing is more important than your physical and emotional safety.
• Job loss: If you are unemployed and don’t know what your next paycheck will be, rely on your emergency savings to handle all your bills in the meantime. 

Debt repayment vs. emergency fund savings

As a Certified Financial Education Instructor, I always recommend that people prioritize building an emergency fund above all else. But what if you’re drowning in debt and living paycheck to paycheck?

Here’s what I recommend:

• Make the minimum monthly payment on all your loans—and not a cent more. You’re going to rack up more debt from the interest, but it’s a small price to pay for long-term success.
• Put every extra dollar toward building an emergency fund for several months. It’s important to build up an emergency fund so you won’t be tempted to take on even more debt in the future.
• Cut expenses and find new income: Cut all your “fun” money (I know, it’ll suck for a bit—but it’s worth it), and spend whatever free time you have working to make extra money, whether that’s delivering food, walking dogs, or getting a weekend job. Use these savings and additional income to beef up your emergency fund.
• Set a goal number for the emergency fund: I recommend $1,000. Once you’ve saved $1,000—enough to cover minor emergencies, like an unexpected vet bill, a flat tire, or a pipe burst—then you can stop working on your emergency fund and begin putting all your extra money toward additional debt payments.
• Pay down your debt: Use the debt snowball or avalanche method to begin tackling your high-interest debts, and consider a debt consolidation loan if you can get a lower interest rate. A marketplace—Credible is our favorite—can help you compare multiple offers at once from several of the best debt consolidation lenders. This way, you can shop for the lowest rate without affecting your credit score.

Assuming you’re able to eliminate your debt, you can then refocus on growing your emergency fund to a larger amount (three to six months’ worth of expenses). But that small initial amount, whether it’s $500 or $1,000, will be crucial in the meantime.

Being debt-free isn’t just about the number. It’s also about the flexibility and freedom that come with it—two invaluable side effects. Building an emergency fund is crucial to avoid falling back into the cycle of relying on debt.

I recommend you start by creating a small emergency fund of at least $1,000, or $2,000 if you have children or pets, as a debt-prevention buffer. From there, continue to grow the emergency fund with small, regular contributions while simultaneously tackling debt. Once the debts are cleared, shift focus to building the emergency fund to cover three to six months’ worth of essential expenses, providing a solid foundation for long-term financial stability.