Standard advice says 3-6 months of expenses. That range is so broad it’s almost useless — $12,000 vs $24,000 for someone spending $4,000/month. The answer depends on how quickly you’d replace your income if it disappeared. A government employee with a working spouse can lean toward three months. A freelancer with irregular income should target 8-12.
Factors That Increase Your Target
Variable income: If monthly income fluctuates 20%+, add 2-4 months. Dependents: Each person relying on your income adds roughly one month. Industry risk: Layoff-prone industries (tech startups, media, hospitality) warrant larger buffers.
Where to Keep It
Your emergency fund has one job: be available immediately. That means high-yield savings accounts only — no stocks, crypto, or CDs with penalties. Don’t keep it in your daily spending account. The psychological separation makes you less likely to dip into it for non-emergencies.
Figure out your personalized target with our free Emergency Fund Calculator — adjusts for stability, dependents, and current savings.