Build Your Financial Safety Net
An emergency fund is money set aside to cover life's unexpected expenses—job loss, medical bills, or major car repairs. Use our calculator to see if your current savings are enough to keep you afloat during a crisis.
What counts as an 'essential expense'?
When calculating your emergency fund, focus on 'must-haves'—the expenses you'd continue paying even during a crisis.
What NOT to include in your emergency fund
These are the first things you'd eliminate during a financial crisis. Don't count them in your monthly expenses:
Where should you keep your emergency fund?
Liquidity is crucial. Your emergency fund should be in a High-Yield Savings Account (HYSA) that meets three criteria:
The 3-6 Month Rule: Who needs what?
Different situations call for different coverage levels. Here's a quick guide:
| Situation | Target Coverage | Why |
|---|---|---|
| Stable W-2 Job, No Dependents | 3 months | Unemployment typically <3 months with stable career |
| Family with Dependents | 6 months | More mouths to feed = higher risk; longer job search if you have kids |
| Self-Employed/Freelancer | 6-12 months | Income is unpredictable; need buffer for slow seasons |
| High-Income Earner | 3-6 months | Higher expenses = need more liquid cash despite job security |
| High-Risk Occupation | 9-12 months | e.g., Construction, Commission-based: less job security |
Should I pay off debt or build an emergency fund first?
The answer depends on your debt situation. Here's a practical framework:
US Financial Realities Your Fund Must Cover
When building your emergency fund, consider these US-specific costs that often surprise people:
Real-World Emergency Fund Examples
Here's how three households with different situations should structure their funds:
Emergency Fund FAQ
Q:Should I pay off debt or build an emergency fund first?
Start with a 'Starter Emergency Fund' of $1,000 to $2,000. This prevents you from going into more debt when a small emergency hits. Once you have that, focus on paying off high-interest debt (over 8% APR) before finishing your full 3-6 month fund.
Q:Is 6 months of savings too much?
Not in today's economy. In a volatile job market and rising costs, 6 months is often the gold standard. However, if your monthly expenses are very high and your job is extremely secure, you might decide to invest the excess to avoid 'inflation drag' (your cash losing buying power).
Q:How do I calculate my monthly expenses?
Review your last 3-6 bank statements and average your spending on essentials: housing, food, transport, insurance, and utilities. This is your 'Monthly Survival Number.' Exclude luxury spending like streaming services and restaurants.
Q:Can I invest my emergency fund to earn more?
No. Emergency funds must stay liquid and safe. Keep them in a High-Yield Savings Account (HYSA) earning 4-5% APY. Stocks, bonds, and CDs are too risky if you need the money tomorrow due to job loss.
Q:What counts as a real 'emergency'?
True emergencies: job loss, medical crisis, major home/car repair, family death. NOT emergencies: vacation, new phone, Christmas gifts, or lifestyle inflation. Use your emergency fund only when you have no other choice.
Q:How long does it take to build a 6-month emergency fund?
This depends on how much you can save monthly. If your monthly essentials are $4,000 and you save $500/month, it takes 48 months. If you save $1,000/month, it takes 24 months. Use our calculator to see your timeline based on your situation.
Q:Should I include my partner's income when calculating coverage?
Only if your partner has a stable, independent income. If you both work for the same employer or industry, include only ONE stable income. If one of you loses employment, you want your fund to cover the household based on the remaining income.