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Like your fingerprint, or your RuPaul's Drag Race fantasy league, your emergency fund is unique to you and you alone.

You Must Be This Big to Be an Emergency Fund

Here’s a horrifying fact. 46% of Americans can’t come up with $400 to pay for an emergency. Instead of an emergency fund, those people have to use credit cards, borrow from friends and family, or just… not pay for the emergency.

Scary, right? That means almost half of my countrymen are one fender bender, one slip on the ice, one infant with pneumonia away from—at best—massive debt. And at worst, massive bankruptcy. Homelessness. Abject poverty and desperation.

Think I’m being dramatic? I’m not.

My purpose in bringing up the nightmare that is living just above the poverty line is not to nag those who can’t afford an emergency. What kind of monster would belittle people so poor they have no way of saving themselves from one minor stumble on the road to making ends meet?

I’m also not here to advocate filing for bankruptcy multiple times (let’s say six) as a legitimate means of making emergencies go away.

Instead, we’re here to plumb the depths of one of personal finance’s most enigmatic puzzles:

How much money should you have in your emergency fund?

Consider your assets and dependents 

If you’re looking for an exact number… I’m sorry to disappoint you.

It’s just never that simple! Your balance is going to be completely dependent on a number of factors individual to you and your living situation. Like a fingerprint, or your RuPaul’s Drag Race fantasy league team, the size of your emergency fund is unique to you and you alone.

Your assets

Do you own a car? How about a home? A boat? (If you’re reading this, love of my life and favored spouse, WE ARE NOT GETTING A FUCKING BOAT.) Expensive property of any kind that would really suck to lose or damage? Even your good health? Great. Then you’ll want to account for that in your emergency fund.

This means you need to understand what your shit’s worth. If your car were totaled, how much would you need to have socked away to replace it? What’s your copay for a visit to the doctor?

You should also understand how much your shit will cost to fix in the event of the most likely accident. Did you buy a house with an ancient water heater? Maybe figure out how much that rusted hulk will cost to replace and start counting down the days.

Your dependents

Another factor is your dependents.

Do you have children? A spouse? Elderly family members or roommates who depend on you financially? A dog? A cat (which our calculations have proven to be the perfect pet)?

Your emergency fund should account for the accidents your dependents might wander into. And what their care and feeding will cost if something happens to you.

One thing at a time

I just named like… a bunch of really expensive things. “Holy shit. I own a house, a car, and 2.5 human children. I better sock away about $50k in emergency savings!” Not quite, my friend.

Emergencies (mercifully) don’t happen all at once. (They usually happen in threes, actually, but let’s put a pin in that for now.) The process of tallying your assets and dependents is not so you can add up all possible expenses and keep the total cost of every potential emergency on hand at all times.

Instead, use these numbers to make a calculated decision about the size of your emergency fund based on what makes you most comfortable:

  1. For the super paranoid: Bad things happen in threes, so be prepared to cover three separate emergencies at all times.
  2. The super chill: Be prepared to cover one of your cheaper emergencies at all times.
  3. The reasonable: Be prepared to cover one of your more expensive potential emergencies with your emergency fund.

Cover your insurance deductible

If all of that sounds bafflingly subjective, good news! There is one concrete, quantifiable number you can work with to determine the size of your emergency fund.

Remember how insurance works? We wrote about it here:

Part of the bargain you make with an insurance company is that you will pay a deductible in the event of an insurance claim. That deductible is the agreed-upon amount you pony up before the insurance company pays the rest of the claim.

So it follows that your emergency fund should at least cover your insurance deductible.

Last spring, a massive hailstorm swept through my neighborhood, decimating everything in its path. Baseball-sized rocks of ice smashed every window on the west side of my house, scraped the paint from the siding, mangled our gutters, and left my roof looking like the cratered surface of the moon. (Don’t worry, the dog is ok. He was cowering in the eastern side of the house.)

This was the moment we’d been waiting for! The reason we’d been paying home owner’s insurance for two years! Gleefully, I made an insurance claim. And the insurance company agreed to pay for fixing our house—a new roof, new windows, new gutters, new paint!

… less the cost of our deductible, of course: $2,800, or 1% of the house’s worth at the time we bought it.

But Miss Piggy didn’t raise no fool.

I read the fine print when we got our insurance, so I knew how much we’d be expected to pay if we ever needed to make a claim. I had that money tucked safely away in my emergency fund for just such a catastrophe. Thanks emergency fund!

Advanced emergency fund mechanics

As we’ve explained before, some people don’t need a carefully calculated and tended emergency fund. Those people are financially solid. They have steady incomes, frugal spending habits, fat savings accounts, and extremely careful and conservative long-term plans. Like Kitty!

Kitty uses her credit card as her emergency fund because she has a very steady income and robust savings for various other projects. In other words, she can pay that shit off before the debt itself becomes an emergency.

Kitty is a Level 19 Financial Paladin. She wrote about her emergency fund strategy here:

But if you are but a humble Level 1 Rich Bitch, you need yourself an emergency fund.

We also caution you to beware the Bacon Emergency. There may come a time when you feel tempted to use your emergency fund for something that’s not technically an emergency. Resist! Be strong!

Here’s a handy checklist for appropriate emergency fund usage (also some bacon gifs because we love you):

Then of course there’s the dreaded Curse of the Emergency Fund.

You know how it goes. You scrimp and save and sell your internal organs to fund your emergency savings. And then, as soon as you have your comfortable number tucked safely away in the bank…

The check engine light comes on.

The curse is that as soon as you’ve saved your emergency fund, you have a reason to use it. Because of course.

So what’s your number, Bitch Nation? How big is your emergency fund? And what kind of exciting disasters do you hope it’ll help you avert some day? Let’s have an emergency fund-measuring contest in the comments! Not nearly as fun as a dick-measuring contest, but so much less likely to result in pictures we’ll have to censor from the blog!

23 thoughts to “You Must Be This Big to Be an Emergency Fund”

  1. Mine’s $10k, which is enough to cover about six months of rent and living expenses (no dependents, human or otherwise, and no debt). I could go smaller, but my current company has a one-year non-compete, so if I did lose my job it could take a while to find something that didn’t violate it, and/or I could do something lower pay short term while waiting it out.

  2. I have a very unstable income as someone who been working as an independent contractor for about a year with very little hours and none of the extra contacts they promised when I signed on. So I’m saving for $2,000 for my cat, $2,000 for my shitty car, and one year of income because I’m starting to see the writing on the wall and I’m normally in bad health $10,200 for a year’s expenses and finally my taxes for my $18,000 a year contract job, so $6,000. I know that’s a lot but it’s what I’m working towards. That’s a total of $20,200 I’ve got my taxes saving as I go and I’ve already got the car and cat funds funded so now just the extra safety net left. But I’m slowly getting there and looking for a better job all the time!

  3. I’m at the point in my emergency fund savings status where Personal Capital alternately tells me I’m doing a great job of saving! or that I maybe don’t have enough cash on hand, depending on the day and how recently I’ve been paid or sent a payment to my credit card. My emergency fund is admittedly a tad smaller than I’d like it to be since it’s just under three whole months of expenses, not just my rent (sometimes I toy with having six months’ expenses saved but that seems like too much to be sitting in cash). But with the wonder that is my tax return, I’ll be able to send a bit more to that fund and do other fun (and by fun I mean personal finance fun/responsible) things.

  4. Comes in threes is right. What I’ve realized about ourselves when it comes to an emergency fund (after having said emergencies back-to back-to back last summer), is that our number is higher because we don’t ever want to have to deplete it 100%. So really, for our comfort level, we need $X + a buffer of $X for when SHTF.

  5. I’m on the light side with 3 months of expenses in an online savings account, but the rest of what used to be in my emergency fund goes into my brokerage account these days. I also believe in the power of credit cards to buy me 30-45 days to figure out how to pay for a massive emergency before I have to pay any interest on the expense.
    Two more: I have a small treasure trove of silver coins (like 90% or 99.9% silver, yo) that I could liquidate if a big catastrophe happened, and I also have a bunch of “travel hacking currency” (AKA Chase Ultimate Rewards) that at worst-case becomes 1c per point as statement credit so there is some stored value there, too.

  6. I don’t have a number in mind: I just keep building a savings account.

    One of the chapters of my first book is called “Challenge Yourself to Save.” It’s an explanation of why even $500 is a good EF to start (because it keeps you from giving up in despair when some talking head says, “If you don’t have six months’ worth of living expenses saved then YOU ARE DOOMED”). It also contains 33 “stealth savings” tactics — simple ways to squeeze a few bucks from even the tightest of budgets. (Some of them are even fun.)

    In my second book, and on every podcast interview I do, I make this offer: Anyone who wants that chapter can have it absolutely FREE. No strings attached — no being asked to join a mailing list, no cajoling to buy my books. I’ll send a PDF to anyone who asks. That’s how much I believe in EFs.

    If it’s not kosher to post this, please edit the sentence: If you’d like a free PDF of “Challenge Yourself to Save,” request it at SurvivingAndThriving (at) live (dot) com. I’ll send it to you and then I’ll leave you the hell alone. (Unless, of course, you have a question about any of the tactics; in that case, feel free to write again.)

    Oh, and hold fast to the no-boat rule. They’re cash-eaters. A boat owner once told me that “boat” is an acronym for “break out another thousand.”

    1. Nah, I’mma leave it in. It’s a helpful resource. Thanks Donna!
      I deliberately didn’t address the 1 month/3 months/6 months rule in this article because it feels too arbitrary to me. Losing your job is a disaster, but how much you’ll need should you lose that job is reflected in your assets and dependents. Your current expenses will change if you’re no longer going to work, and there’s no telling how long you’ll be out of work.
      And this fucking boat, man… THIS FUCKING BOAT. He fly fishes, which involves wading into the stream, so I’m not sure why he needs a boat anyway.

  7. I know, it shocks me how many people aren’t prepared for an emergency! I do know far to many people, who despite making a decent income spend until it’s gone every month.

    And yes, agree cats are the best companions by far…

  8. For unidentified reasons whenever I think of the potential disaster that would trigger me to spend my emergency fund it is always losing my job. I feel comfortable with 3 months of current expenses because I have a few safety nets. One is that I can get out of my lease and significantly reduce my apartment burden. Another is that I have qualifications that make it very easy to get another job.

    Your article did prompt me to brainstorm other situations. This buffer would also be sufficient to cover any healthcare premiums, and I have decent disability coverage. In the case of a car emergency, this amount is sufficient to cover most repairs. Now I’m going to throw some positive vibes out there that these don’t come true at all, let alone in threes!

  9. I have written more posts about this on my blog than on any other single topic. I’ve had no efund, a small efund, a big efund that I immediately moved into my IRA, a big efund I was reluctant to touch, etc, etc, etc, etc, etc. I really had a hard time psychologically with the concept of a chunk of money sitting around for no particular purpose.

    I finally settled on something that’s been working for a couple of years now, which I call the infinitely refreshing emergency fund ( Basically, I take the 52-week savings challenge every year and save the cash to my e-fund — whether I’m using it or not. I haven’t needed it lately, so it’s up pretty high at about $5500. But if I do use it (generally for car repairs) I don’t rush to fill it back up; I just let it ‘naturally’ refill at my scheduled savings pace.

  10. I’ve always chafed at the “X # of months’ salary” formula, since I’m in a job that a) if I were to lose it, it would mean that a massive sector of our society had completely collapsed, so we’d have bigger fish to fry than my emergency fund could handle and b) if somehow I did manage to lose that job but the profession itself hadn’t disappeared, I couldn’t find a replacement job in anything less than a year because the job market for my profession only runs once per year. So I keep my “emergency” fund in several places for several purposes: a cc I pay off every month, so small unexpected expenses are just covered that way. Then I have about $5K in a savings acct that is really easy to access, with the purpose of car/home repair type bigger unexpected expenses and also those recurring but non-monthly expenses like auto insurance. Then there’s about $5K (and growing) in a high-yield acct that I could access in about a week, with the purpose of building it toward the annual IRA investment etc, and which I could use for emergencies if needed. Finally, I have a brokerage acct of about $10K (and growing) that if shit really hit the fan I could get at within two weeks.

  11. My e-fund is probably far bigger than I need – $27.5k in USD. I think of it more of an ‘apocalypse fund’. I.e. Lose job, house burns down, car dies, health flatlines and another major expense simultaneously occur – can I survive for long enough to regroup and get back on my feet?

    It’s my ‘baby FU fund’, as in “baby, I just FELL UNDER a bus financially and I need to get up asap!”


  12. I have an emergency fund of around $14K. It covers ~9 months of minimum living expenses, a car insurance deductible, AND an emergency flight to my family all at the same time. Or, separately, it could cover the cost of buying a cheap car if I had to replace my current one.

    The Curse of the Emergency fund is SO REAL. Last year, I finished funding my emergency fund only to need to replace my old car AND laptop within a few months of each other. I only just finished funding the emergency fund AGAIN, and then I damaged the driver-side mirror on my car in a parking garage.

  13. I never saw your reply on the “bacon emergency” post, but haha, I’m glad the immediate need for an EF as soon as it is funded is such a universal experience! I was thinking…maybe it just *feels* that way because before I had the EF, I would have just put it on a credit card without too much angst and now that I have the cash buffer, I feel actual pain when I have to cough up $300 for something unexpected. I think with the EF comes a heightened awareness of where your money is going and your “emergencies” are more quantifiable, if that makes sense.

    Since funding my EF, I have also become more intentional over what actually is an emergency and what is just a “ok, I’ll do that in a few months after putting aside some money especially for that” sort of thing. Like, I visited the dentist in December who recommended I get a special cleaning because of the state of my gums, but instead of panicking and handing over my credit card, I asked her if it could wait a bit and she told me that of course it could wait for a month or two and nothing was in a critical state. I saved $200/mo. from my January and February paychecks and then last week, I went and got the cleaning done with no fuss. I could have labelled that as an emergency and taken the money from my EF, but I’ve become fiercely protective of that $3,000, so instead I waited. In the past, I’ve shot myself in the foot by labeling everything as an emergency and depleting my EF before it ever had a chance. No more bacon emergencies!

  14. I currently have $4k in my emergency fund, and still (kinda) building. This could actually last me a pretty long time (4 months about) if I lost my day job, because I have managed to keep my minimum required spend laughably low by living on a working farm and putting in some labor (3 hours a week during off months, 10 hours a week during harvest) in exchange for really cheap rent and all the free veggies, eggs, and ethically-raised meat I want.

    But I am worried about a larger emergency such as my car completely dying on me, or a health expense my insurance won’t cover, so I’m debating about how much I should keep tucked away.

  15. Sorry to hear about the hail storm but, like you said, this is why we have an emergency fund (and insurance!).

    We are rocking a $10k emergency fund which is either total overkill or woefully underfunded. Once little Done by Forty comes along, I think our family deductible is going to get pretty big. Though I guess that’s what the HSA is for? It’s like a separate, health specific emergency fund?

    We followed the Dave Ramsey method way back in the day. Starting with $1k then moving up to 3-6 months of monthly expenses. It’s not perfect but it gets us in the neighborhood.

  16. I’m living off of my emergency fund now. It had six months of take home income in it at its peak. I’m now down to 3.5 months. I also have cash stashed in accounts for travel, car repairs, blow money, home repairs, etc. now that I think about it, I’m basically just shuffling money between my emergency fund and my sinking funds. It’s all the same money. Whoa! Mind blown. I actually have more $$ than I thought.

  17. I spent a few years building mine up – it’s currently a set of 12 $2000 laddered CDs – every month one matures, and then is rolled over, including the interest, into a new 1 year term.

    Is it overkill? Probably? But my thinking at the time was to have a year of expenses if i were to lose my job. And i have a car payment and a mortgage.

    Although, if I *did* lose my job, I would immediately cut back on my expenses down to the minimum, so I would not need 2k per month…but that was a number that I picked and it lets me sleep well at night.

  18. My EF goal is around $6k. I had it going decently well, but then the fridge went out this past weekend because of course it did, so that drained a good portion of what I had saved towards my goal. I’m just glad that I had the money to fall back on, instead of having to put it on my credit card that I’ve been working on paying down and erasing that progress!

  19. This is going to sound extreme, but I currently have $54k in cash, of which $20-25k is my very conservative emergency fund, the rest is cash for paying bills, planned home renovations and improvements, and to throw in the stock market. I have stable income and a partner to split costs with so it might not be necessary, and I could be losing out on returns; but it makes me feel so much more secure and comfortable to have a big ole cash cushion. 2 weeks ago I was having chest pain and went to the ER. For 2-3 hours of care and no clear answer on what caused it, I was slapped with a $3,000 bill. Met my deductible in one fell swoop! I knew I had plenty cash set aside, so I put it all on my credit card and will be enjoying those travel points!! Now I’m trying to get in as many Dr appointments before the end of the year since I won’t be paying out of pocket.

    1. If “peace of mind” is extreme, then I think that’s perfectly legit! So glad you’ve got a solid cash cushion for all your goals. My only advice would be maybe putting the home renovations portion of your cash into a CD for a year or two until you are ready to use it. That way it’ll earn a little interest to keep up with inflation, without the risk of a stock market loss.

      Also I’m doing the happy dance with you about putting emergencies on a credit card FERDA POINTS.

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