Disclosure: This post contains affiliate links, which means I earn a commission at no expense to you. Affiliate links are marked with the asterisks (*)
If you don’t have an emergency fund yet, you need to set one up. Here’s a look at how much you need to save in this fund.
We always think “that will never happen to me.” And then it happens. And suddenly, you don’t have any money coming in. This is what your emergency fund if for.
Don’t feel bad for not having one yet. It’s part of saving for the future that a lot of people overlook. However, as a financial professional, one of the first things I suggest to anyone is to make sure they’re saving for an emergency. I’m not talking about their car breaking down. I’m talking about losing their job.
How much to save in your emergency fund
This is the part where I get a lot of shocked faces. The amount you want in your emergency fund* is relatively high.
You want at least three to six months’ worth of income or living expenses in your emergency fund. The more the better.
Three to six months’ worth of income? Am I serious?
Yes! You see, if you’re laid off, it could take you two or three months to secure a job and start the pay coming back in. You want to have something to fall back on in that time. You need to make sure you have the money available so you’re not putting your living expenses on a credit card.
The problem is a lot of people don’t think of this. You may think you’re doing a great job at work and you’re integral to the company. Suddenly, the company runs into financial problems and you find yourself laid off. I’ve seen it with people working somewhere for only a year and with people working somewhere for decades.
I just had to dip into mine recently. My income took a hit at the end of 2023 due to some changes to Google’s algorithm. I’ve got things back on track, but during that time, I needed my emergency fund to pay some living expenses. If I didn’t have that, I would have struggled to pay my rent!
MORE: Why your emergency fund needs to be in a savings account
How to save that emergency fund
You’re not going to be able to put the full amount into your emergency fund right away. Don’t worry about doing that immediately. You just want to save as soon as possible.
I’d say to save as much as you can from your income. That’s not a great idea for an amount, though, is it? What if you live paycheck to paycheck? Well, you need to find a way to save some of your income.
You could start with 10% of your income is put in savings. You could start by just saving $50 per month. I know this is going to be difficult for some, but you need to look at your budget* and find ways to save. I can help you do that!
Please make saving for your emergency fund a priority. You never know when you’re going to need it.
MORE: Why your emergency fund is one of the most important parts of your budget
Get in touch to find out how you can budget to save up for your emergency fund.
