How Much Money to Hold in Your Emergency Fund

August 2nd, 2019

Your emergency fund is there to protect you in case you lose your job or face a major unexpected expense. We typically recommend holding 3 to 6 months’ worth of living expenses in your fund. Here we’ll help you actually calculate this by breaking down categories of expenses. For each category, keep track of how much you spend in a typical month and we’ll add them up at the end.


This is probably your largest monthly expense. And it’s also the hardest to cut back on if you’re faced with a financial emergency. So you’ll want to be sure you’re covered. If you own your home, include your monthly mortgage payment.


This would include utilities like heat, water, electric, and gas. (If any are already included in your housing/rent expense, don’t add them twice). Also include your phone and cable/internet payments.


Add up all of your monthly insurance payments, including health insurance, auto insurance, and home insurance (owner or renter’s).


If you spend money on transportation, account for it here. This might be car payments, gas, cabs/ride shares, and public transportation. And if you aren’t quite sure how much you spend in a month, try to come up with a reasonable estimate.

Debt payments

If you have any monthly debt payments, like student loans, be sure to include them. Don’t include mortgage payments here though. That should be in the housing/rent category.

Food, toiletries, and clothing

Tally up how much you spend each month on your living staples, including food and toiletries (separate from dining out, which is covered in the next section). Also include an estimate of your monthly spend on clothing.


Here you can add up your “fun” expenses, like going out with friends, movies, books, hobbies, travel, etc. This category usually has the most flex if you need to cut back, say if you lose your job. But be realistic with estimating how much you actually spend here.

Other/Infrequent expenses

If you have any other expenses we missed, include it here. You can also include any infrequent expenses you don’t pay on a monthly basis. Figure out the monthly equivalent and then add it to your total.

Adding it all up

Once you’ve run through the list, add up your monthly expenses for each category then multiply the total by 3 or 6 to figure out your target emergency fund amount. Don’t freak out if you aren’t fully funded yet. But be sure you’re regularly contributing to your fund until you are.

Where to keep it

In terms of where to keep your fund, you’ll want to make sure it’s secure and accessible. A savings account is usually your best bet. But not all are created equal. They vary with respect to how much interest they pay and some of their features. We can help you set one up if you’re interested.

Anything else we can help you with?

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