Should You Have a 3-Month or a 6-Month Emergency Fund?

Should You Have a 3-Month or a 6-Month Emergency Fund?

Let’s make sure you’re on the path to financial success - then help you stay there!
The Money Guy Show takes the edge off of personal finance. We’re financial advisors that believe anyone can be wealthy! First, LEARN smart financial principles. Next, APPLY those principles! Then watch your finances GROW!

We can’t wait to see you accomplish your goals and reach financial freedom! New shows every week on YouTube and your favorite podcast app. Thanks for coming along on the journey with us.

[magen-bn]

I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.

[TechieLynn]

OMG! I'm internet famous 😀 lol. Thanks so much for taking the time to answer my question. I had an idea of what I should do but it doesn't hurt to ask The Money Guy Show 😉

[sasukesuite]

My emergency is at 12 months because it took me 6 months to get my first job out of college and I’m on a 6 month government contract right now, so I might be unemployed again and I need extra cushion because entry level positions are super competitive.

[TheJeanean]

After a layoff it took me almost a year to get a new job. So I’m working on a 12 month emergency fund.

[robdogracing]

I am a firm believer in a 6mo emergency fund if you are a home owner. My house, not in a flood zone, flooded this summer. Cost me 3mo of EF cuz I did most of the work myself. Some neighbors spend well into 6mo EF. If my car wasn’t a Honda I would have also needed to get another car. You can believe I have flood insurance now.

[shanisafan]

I am a single person with a single income. I don't doubt that I could find another job in my field but it would take several months to replace my income. My emergency fund is 13 months. I like it because I know it will not take me a year to find a new job in my field but because I am set for over a year, I don't need to rush to take a low paying job out of desperation.

[jacobside]

I have more than a year. After a being out of work for nearly a year in 2010 I made the decision to never be in the situation were I run out of money again

[andersonlegacy]

Multi generational household. 12 month emergency fund as 4 generations of members rely on it. Everything past 12 months is in taxable brokerage.

[Luckyaau]

My wife and I only have about 3 months (~$20k) for a couple reasons:
1. easy to replace jobs
2. We have six figures in a taxable brokerage account
In my mind, that's several years worth of expenses that we can pull from monthly, like a retiree would. It only takes two days to sell some shares and transfer the cash into checking. Once you're firmly in step 7 of the FOO, step 4 can be more relaxed. Furthermore, steps 1, 4, and 7 are related: have quick access to cash if/when needed/wanted. The further along you are, the more cash needs to be available.

[nathanmorgan]

In this day and age, you'd better have a 12 month or greater emergency fund.

[michaelaustin]

One thing I wish they would touch on that nobody talks about is insurance premiums when unemployed. If I lost employment and had to pay full premiums for COBRA, my monthly budget would increase ~20%

[curtiswfranks]

If one has a side job, then getting fired from both jobs simultaneously is probably decently unlikely. The side job may be able to help stretch emergency funds longer than they otherwise would last.

[Anonymous-One]

Completely agreed! The higher the level your position, typically the longer it takes to find another job at or above that level.

[rapfreak]

One other option, which definitely has more risk, is to save 3 months and then save another 3 months (or max out) your Roth IRA as you could always access that original contribution without penalty or taxes. Risk comes into that these funds aren’t as liquid as cash in the bank and the market could be down when you need it so you lock in a loss. Just another strategy that keeps your motivation towards saving and investing.

[genevievetripp]

I would do 6 months if my significant other worked at the same place as me, especially now that more companies are struggling financially. Don't want to both end up unemployed.

[paulr]

It's not only about your job, but allso your health, to have a emergency fund.
So 3 months is not enough, I think at least 6 months.

[MrWhite]

I’ve gotten to a place where 12 months feels the best. It really makes emergencies feel wayyyy more chill lol.

[Lawnfella]

I’d have a minimum of 1 year emergency fund

[MC-gjfg]

3 AND 6 months. 3 months in the bank where you can access the money at any time and 3 additional months someplace where that money will earn interest for you, but you can access it within a 3 month period, such as a 3 month CD or ibonds once you've had them for at least a year.

[Trudloops]

Thanks for this video. I was wondering the same thing. I did not think of these considerations, income level, job, significant other, persons relying on the income and stage of life. This advice helps a lot. Thanks.