A woman with glasses looks at finances to determine how much an emergency fund should be.

How Much Should an Emergency Fund Be?


Calculate essential expenses and automate savings for your emergency fund.

In uncertain times, it helps to increase defenses for unexpected events, like a job loss, medical emergency, or a big car or home repair bill. In the current economic environment with high inflation, rising interest rates, and volatile markets, having a sufficient emergency fund makes more sense than ever. You’re likely paying more for everyday expenses and asking: Do I have enough if something goes wrong?

Emergency savings can be a challenging aspect of financial planning. In 2021, 25% of Americans had no emergency savings, according to a Bankrate survey, while another 26% have some savings but not enough to cover three months’ worth of expenses. Diligent savers may have found their emergency reserves reduced by unexpected expenses during the pandemic. People who already have solid emergency fund plans in place may be finding more of their income going toward the higher cost of groceries and household goods instead of savings.

The bottom line: Now is the time when everyone could benefit from taking a close look at this important financial priority. Here’s what you need to know to build a realistic emergency savings account that can reduce anxiety about your financial future.

Determine How Much You Should Save

Conventional wisdom states that the ideal emergency fund consists of three to six months of essential living expenses. That way, you’ll have some breathing room if you lose your job, get sick or injured, or endure a flood, fire, or other catastrophic event. Exactly how many months of expenses you’ll want to put aside depends on your age, job security, and income stability. Someone working at a fledgling startup may want more in reserve than someone with long tenure at an established organization.

The idea of putting aside enough money for several months’ living expenses can be daunting, especially if your budget is already stretched. It’s easy to get discouraged, and you may be tempted to give up on the idea, but instead, try making your initial goal more doable. This could be just one rent or mortgage payment or a few hundred dollars put aside for a surprise car repair. Anything you can put away will be helpful when unexpected expenses hit.

Where To Start

The first step to building an emergency fund is an accurate picture of your essential expenses. Add up how much you spend each month on mortgage or rent, utilities, food, auto expenses, and healthcare premiums. For the purposes of an emergency fund, you want to include only essential expenses, not discretionary spending like entertainment. If you use a spending tracker, this will help you make this calculation quickly with up-to-date numbers. If not, be sure to look at expenses during recent months so you’ll have realistic numbers that take rising inflation into account.

Once you’ve calculated your ultimate emergency savings goal, you’ll need to take a close look at your spending to see how much you can afford to put away each month to build toward that goal. If your budget is tight, try to find places where you can redirect some spending into your emergency savings. Monthly fees for subscriptions or streaming services you rarely use, cutting back temporarily on travel and entertainment, and going without monthly cleaning or lawn care services are all potential ways to find money for a rainy day. In addition, you may want to give your monthly contributions a one-time boost from small windfalls such as your tax refund or money earned from a side gig.

Finding the Sweet Spot

Calculating a realistic amount you can contribute regularly to your emergency savings is key to success. Contribute too much and you’ll find yourself dipping into the fund or using high-interest credit cards to cover everyday expenses. Too little and you risk not having the cushion you may need for the unexpected. You’ll also need to balance this savings goal with your other financial priorities such as paying off high-interest debt and saving for retirement.

You may need to experiment with different savings amounts, making adjustments over the next few months as you begin to build your account. Whatever the amount you land on, make sure it’s included as an item in your overall budget so you are sure to make regular contributions. It has to be part of your financial plan, not an afterthought if you have money from your paycheck left over.

The Best Places To Save

Here’s the good news. Recent interest rate hikes from the Federal Reserve often translate into higher yields on many savings accounts. That means your emergency fund will grow faster.

Also, in the wake of the pandemic, many companies are offering emergency savings programs, often with after-tax payroll deductions and matching contributions. Be sure to check with your boss or your benefits department.

Creating a dedicated account for emergency funds provides a specific place to transfer funds for this important goal. Keeping the funds separate from other accounts also helps create a mental barrier that can help keep you from using the money for expenditures that aren’t emergencies. Fifth Third Momentum® Savings makes this task easy by helping you earmark your goals and automatically save for them with transfers from your free Fifth Third Momentum® Checking account.

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