How Much Should You Have In An Emergency Fund?

Emergencies happen.  Unfortunately, they always seem to happen right when we least expect it and are least prepared for it (ie. no emergency fund savings).  Sometimes a spark plug blows right after you fix a broken axle and think you are done with car repairs. Other times, your air conditioner breaks in the dead of August when you are nine months pregnant (yes, that happened to me).

Instead of living like a gambler and hoping bad things never happen to you, what if you were totally prepared for life’s emergencies?  What if the thought of a $1,500 well pump replacement didn’t send you to tears or pulling out a credit card? Wouldn’t that be magical?

When you are serious about having control over your money, you know bad things are going to happen, they always do.  So, instead of hoping they don’t happen to you, you prepare for them the best you can.  

If you are getting out of debt, these are the emergency fund savings (and development of emergency funds) I recommend you have to be successful.  If you have no debt, you can skip to the very last emergency fund, as this is the one you need.

The best preparation for a truly unexpected expense is an emergency fund.

NEW TO BUDGETING?  CHECK OUT OUR FREE BASIC BUDGET SETUP WORKSHEETS TO GET STARTED TODAY!  JOIN NOW BY SIGNING UP BELOW!

So, how much should you have in your emergency fund?  Is there a right number?

When it comes to your emergency fund (for those paying off debt), I am a huge fan of initially just having $1,000 set aside for true emergencies.  Most things can typically be covered by $1,000. Here are some of the emergencies I have had in the past 12-24 months:

• Air conditioner breaking in the middle of August while nine months pregnant.
• Plumbing pipe had a tree branch growing through it which led to toilet sewage back up flooding our basement (literal poop in my basement).
• More car repairs than I can even remember over the past three years (flat tires, gear shift differential repair, blown spark plug, broken door motor, etc.)
• Entire Well Pump replacement required or we didn’t have water
• Surgery for my daughter they required money down on the day before it was scheduled.

The list goes on and on.  We have had so many things come up that we have needed our emergency fund for.  And thank goodness we have had it!  

$1,000 Emergency Fund Savings

I consider this to be your beginner fund.  We are still operating with this amount as our safety net, and so far, it has been enough for what we need.

If you are new to budgeting or debt payoff, your first emergency fund savings goal should be $1,000.  This is a wonderful place to start that should cover the majority of emergencies you may encounter.

Once you have been budgeting for a bit, and understand what you require to live on every month, then I recommend you graduate to an additional cash reserve.

1 Month’s Expenses

This one savings amount has been THE GAME-CHANGER for my family.  If there is one thing I recommend for everything to do, no matter what your income is, this is it.

Continue to have your $1,000 emergency fund, BUT, in addition to that, you will also work on saving up an entire month’s expenses.  

Ready for this?

When you have an entire month’s income in your savings you get to do two things.

1.  You can live a month behind.  Meaning the money you made in June, you will use for July’s expenses.  This makes it so easy to stick to your budget. You will know exactly how much money you have available for your budget because it is all already in your account.

2.  You have a built-in 1-month buffer.  This gives a sense of peace I can’t quite explain.  I have been living a month behind going on 4 years now and have yet to dip into that.  BUT, I know that if things were to get really tight, or if we had a super expensive emergency, or if one of us lost a job, we would at least be covered for a month.

This is such an insanely easy thing to do that will give you a sense of freedom and safety without having to save up thousands and thousands.  

The $1,000 emergency fund is sufficient for our family because we also have one month’s income saved.  This can do the same thing for you.

Some people worry $1,000 won’t be enough.  And you know, in some cases it may not be. So if/when that happens, your month’s living expenses will have you covered.

Bye-bye stress and anxiety!

Once you are out of debt, then you can move on to the ultimate emergency fund in case something truly catastrophic happens in your life.

3-6 Month’s Living Expenses in Emergency Savings

This is huge!  This is the safety net that can protect you from pretty much every emergency you could possibly encounter.  Once you have this amount of money saved, you basically just sit on this forever until you need it.

It’s funny though, most of the time, once you have the emergency savings, you tend to not need it.  But, if you didn’t have it, you would definitely need it. Isn’t that just how the world works?

Emergency funds do not need to be over-complicated.  They are simply there to keep you safe and prevent you from having extra financial stress.  

If you are just starting out, start at $1,000.

Related Posts:  

15 Effortless Changes to Quickly Save $1,000

What to Do If You Need Money Now:  A 30-Day Plan to $1,000

How to Pay Off $1,000 of Debt in a Month On Any Income

Once you have your $1,000, work toward getting one month ahead on your expenses.  The freedom you will feel from this is indescribable.  

Related Post:

4 Steps to Save One Month’s Income & Stop Living Paycheck to Paycheck

After you are out of debt, or if you had no debt to start, the ultimate emergency fund is having 3-6 month’s expenses in savings.  You can take on the world with no fear at that point!

Instead of stressing about not having money when things come up, get to work on setting up your emergency fund today!  Depending on where you are in your journey, focus on having $1,000, one month’s expenses or 3-6 month’s expenses in savings.  Your future self will thank you for making the decision to do this today.

READY TO START BUDGETING?  CHECK OUT OUR FREE BASIC BUDGET SETUP SHEETS TO GET STARTED TODAY!  JOIN NOW BY SIGNING UP BELOW!

PIN FOR LATER!