How Much Should I Have in My Emergency Fund?

Life is unpredictable and you can be responsible for unexpected expenses at any moment. Whether it is a broken appliance, a minor accident or an urgent vet bill, having a financial cushion can make all the difference. An emergency fund acts as your safety net, helping you manage these surprises without stress or debt.

What is an Emergency Fund?

An emergency fund is money you set aside specifically for unforeseen expenses. It is your “just in case” savings that keeps you from relying on credit cards, borrowing from your retirement account or friends, or dipping into savings meant for other goals such as a vacation.

How Much Do I Need?

You might not need as much as you think. Traditional advice recommends saving three to six months of essential living expenses and that is still an excellent goal to work toward.

Here’s how you can approach this:

Start with $2,000. This milestone puts you ahead of many Americans who have not yet reached it.*
Take small steps. If saving six weeks of expenses feels overwhelming, begin by setting aside $10, $20 or $50 a week. The key is to start. Automate transfers to a separate savings account so you are consistently building your fund without having to think about it.
Focus on essentials. Your emergency fund is meant to cover rent or mortgage, utilities, groceries, insurance and transportation costs. It is not for discretionary spending like entertainment or dining out.

Where Should I Keep My Emergency Fund?

Your emergency fund should be safe, easily accessible and earning some interest. Consider these options:

High-Yield Savings Account
These accounts usually offer better interest rates than traditional savings accounts and are easy to open and access. Just watch for introductory rates that drop after a few months and minimum balance requirements that might reduce your earnings. Always read the terms before opening an account.
Certificate Accounts
CDs offer a fixed interest rate for a set term, often higher than savings accounts. The trade-off is that your money is locked in for the term length. Early withdrawal usually incurs a penalty. One strategy is a CD ladder where you open several CDs with staggered maturity dates to maintain some flexibility. CDs are best for those who already have an emergency fund in a liquid account.

I have a CD that I let mature every six months, and I’m extremely happy with how it’s supported my savings goals so far. It’s a way to earn a bit more interest without locking all my savings away for too long. That little extra has really helped my emergency fund grow steadily over time.

Your Next Steps

Think of your emergency fund as a seatbelt. You may not think about it often, but when you need it, you will be very glad it’s there! Learn more about our deposit rates and our BridgeBuilder High Yield Savings Account and how they can give you that safety net you’ve been looking for.