How much money should you save for an emergency fund? Sure it’s not fun to think about emergencies where you need cash fast. But it is MUCH better to plan ahead with an emergency fund so you’re not scrambling to find money when you really need it. Here is how much money to put in an emergency fund, where to put emergency fund money, and an easy way to automate your emergency fund saving.
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How Much Money Should You Have In An Emergency Fund
A good plan to have is to plan for the best and expect the worst.
While you can’t plan for all potential emergencies that could come up, you CAN have a financial plan in case of an emergency.
One of the ways that you can help yourself recover from an emergency is by having some funds available to cover any sudden costs caused by an emergency.
So how much money should you save for an emergency fund?
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How Much Money To Put In An Emergency Fund
In reality, it might never be enough to cover the cost of the emergency. If a hurricane comes through and wipes out your home, it probably would take two emergency funds to cover all the costs of building a new house at once. However, if you have to go to the hospital, or you lose a job, it could mean all the difference in the world.
I would suggest that you put in as much money as possible for an emergency.
If at all possible, you should have 3 months salary at the minimum as a backup in case something were to happen. If you can increase this to 6 months salary to put in an emergency fund, all the better.
This allows you to get through the initial hardship of the period. If you have this much money saved in an emergency fund, it could also help you avoid having your stuff repossessed. This is HUGE for peace of mind.
How Much Money Should Be In My Emergency Fund If I Want a Bigger Buffer
When it comes to money, I am personally on the cautious side.
I learned some of these money habits from my parents growing up (you can read about these 7 financial lessons you should have been taught here).
By being this cautious (and frugal), I was able to fully pay off my debts, including the mortgage. (Here are my tips if you want to get your mortgage paid off faster). It is a very liberating feeling being debt-free.
If you are able to, or over time, I would save even more money in your emergency fund. I would aim for a full year of salary in an emergency fund. This will give you a lot of leeway when it comes to any emergency that could arise.
The peace of mind is worth the effort it takes to save more money.
Here are ideas on making extra money so you can squirrel it away into an emergency fund.
How Much Money to Keep In An Emergency Fund If You’re On a Tight Budget
How much money should you save for an emergency fund if money is tight?
What if you don’t have enough to save 2-4 months salary at a time?
I would suggest that you save as much as you possibly can.
Even if you have $500 in the bank at the time of the emergency, it is still 500 dollars that you don’t have to worry about finding to take care of the emergency.
It will allow you to still buy food and find some temporary shelter should you lose your home or lose your job.
For longer term, you can start improving your financial situation so you can build a bigger emergency fund.
Here are articles that will help:
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- Creating a Monthly Budget: Easy Steps to Get Control of Your Money
Where Should You Keep Your Emergency Fund
You never know when an emergency is going to hit, or when your financial situation is going to change.
You know it’s important to start an emergency fund, so now where to put your emergency fund?
One strategy for saving for an emergency fund is very simple. Take your spare change and put it into a jar that you don’t touch.
You will be amazed at how much spare change that we accumulate on a daily basis.
Either that, or you can have your spare change transferred to a savings account to help you save that way.
A better way than just saving your spare change is investing your spare change. There is an electronic version of rounding up and saving your spare change – it’s called Acorns. It is a super inexpensive investment and banking app that’s trusted by Business Insider and CNBC (among others).
Acorns helps you invest spare change, invest a piece of every paycheck, and get money tips on the go. When it comes to saving money and investing money, I am a huge fan of automation. Whatever makes it simple to save, and where I don’t even have to think about it, means I will save more money over time.
So How Much Money Should You Have Saved In An Emergency Fund
You never know when you are going to lose your job or when your house gets hit by a tornado. You never know when you could break a bone or have your interest rate on your credit card go up raising the payment.
It’s not fun to think of the things that could go wrong (my naturally anxious brain knows that!). Start saving for the future now by starting an emergency fund. By making sure you have something in case of an emergency expense that comes up, you will feel a lot less stress about your financial future.
If you’re overwhelmed with how much money should you save for an emergency fund, or where should you keep your emergency fund, I would recommend that you keep it simple. Sign up for Acorns and have spare change automatically rounded up and invested. Acorns can also move money automatically from your paycheck into an emergency fund account for you.
It will be really helpful to also read this post on creative ways to save money on a tight budget. I bet there are some saving money strategies you haven’t thought of that will get you saving more money!