Most financial planners recommend holding an emergency fund worth three to six months of essential expenses. The range is wide for good reason: the right amount depends on how stable your income is and how many people rely on it.
Start from essentials
Count rent or mortgage, utilities, food, insurance and minimum debt payments — not total spending. That figure is what the fund needs to cover.
Adjust for your risk
Freelancers, business owners and single-income households generally need a bigger cushion than dual-income households with stable salaries.
Keep it boring and accessible
An emergency fund belongs in an easily accessible savings account, not in investments that might be down precisely when you need them.
Key takeaways
- Start from essentials
- Adjust for your risk
- Keep it boring and accessible
