How Much Should You Save for an Emergency Fund?

Key insights:

• Most people should aim to save 3–6 months of essential living expenses in an emergency fund. 
• Aim for 3 months of expenses if you have a stable income and lower financial obligations 
• Target 6 months or more if your income fluctuates or you have dependents 
• Make sure your emergency fund is kept somewhere easy to access, like a savings account, so it’s there when you need 

An emergency fund is money you set aside for urgent, unexpected expenses, such as car repairs, medical emergencies or home repairs. It could help you navigate emergencies without having to take out a personal loan, incur credit card debt or borrow money from friends and family. The exact amount you save depends on factors like income stability, monthly costs and financial responsibilities, if your income is unpredictable or you support dependents, a larger cushion — closer to 6 months or more — can help to provide greater security.

Let’s explore ways to determine how much to save, where to keep your emergency fund and what to do once you’ve saved your goal amount.

Starting your emergency fund

The primary goal of an emergency fund is to cover significant and urgent unexpected expenses, like a car repair or a leaky roof. So, your first savings goal may be to cover an expense of this size.

That said, starting an emergency fund can be as simple as saving a certain amount from every paycheck or by the end of each month. Regularly depositing even a small sum into a dedicated savings account can help you better handle unexpected financial expenses.

Keep in mind, some banks offer automatic savings tools to help you build better savings habits. Consider using these to easily build savings into your monthly budget.

Continuing your emergency fund

The next goal for your emergency fund should be saving for a larger financial expense, such as job loss. Experts typically recommend building up 3 to 6 months of necessary living expenses, but the number can vary. Your exact savings goal will depend on various factors, including your annual income and how much you can realistically set aside after your monthly bills are paid.

To get started, calculate what you spend on groceries, rent, utilities and other essentials every month. Multiply that number by how many months of emergency savings you want. That’s your emergency fund goal to work towards. If the number feels unrealistic for your financial situation, figure out what is reasonable for you. Having some kind of cushion is better than having none at all.

Keep in mind that it’s common to have to take money out of your emergency fund as you’re saving, so it may take longer than you expect to reach your goal.

Where should you keep your emergency fund?

Your emergency fund should be easily accessible — you never know when you’ll need it. Consider keeping your emergency fund in a savings account or split between a checking and a savings account. Some people like to have a secondary savings account just for this purpose.

No matter what kind of savings account you use, it can be helpful to split your paycheck so a portion of it goes directly into your emergency fund. Alternatively, you may want to set up a regular automatic debit from your checking account to your emergency fund.

Keep in mind, it’s usually not a good idea to tie up your emergency fund in CDs, where you won’t be able to access the money for a specific period without paying a penalty.

What to do after saving for an emergency fund

Once you’re satisfied with the amount in your emergency fund, think about what to do with the part of your budget that’s no longer going toward it. For example, you may consider putting this money toward other short- or long-term savings goals, such as buying a house or a car. You may decide to open several different savings accounts depending on your financial ambitions.

Overall, setting aside some money in an emergency fund every month can be a great way to protect your financial health and give you peace of mind during a challenging time.

Disclosure: This article is for general educational purposes. It is not intended to provide financial advice. It also is not intended to completely describe any Citi product or service. You should refer to the terms and conditions financial institutions provide for various products.