How Much Should I Have in My Emergency Fund

An emergency fund covers unexpected expenses as they arise. It can also protect your livelihood in case of job loss. How much should you have in your emergency fund? I'm answering that question in this video!

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I’M SOCIAL UP IN HURR:

[MrBrewman]

25k for me. Overkill probably but the peace of mind of it is extremely liberating.

[snapdragon]

I have two types emergency funds I am building on. A 3 x month living emergency fund to cover costs if we are unable to work, get made unemployed etc. Some of this is in cash, some in a bank account. Then separate funds for things like car repair emergencies, unexpected vet costs (not planned vaccinations, flea treatment etc), household emergency such as boiler breakdown.

[jackcarraway]

I would never stop putting money into a savings account. Besides giving you peace of mind for practically any emergency, you now have flexibility to use some of it for something like a new car, a house, an extension to your house, etc.

[misslondon]

25, living in London and £45, 000 in an emergency fund, without any inheritance. Feeling much safer and I’d recommend it to anyone❤️

[josephgreer]

After the Great Recession...and now with Covid...a 6 month emergency fund seems underfunded. In 2017 (when the economy was good), the average time spent unemployed was about 6.25 months. I recommend at least 9 months for a fully funded emergency fund.

[bettycalixtro]

I'm so glad I found you and dave ramsey a year ago! It has changed my life so much!!!

[ariefraiser]

6 months in a high yield savings account is the sweet spot for the vast majority of people. I never understood the 12 months. At that point you're losing a significant amount of money to inflation.
Once you have 6 months in a high yield savings account in my opinion anything extra should be invested in something fairly liquid that returns more than the 1-2% savings accounts return. But make sure it's relatively moderate risk like an index fund instead of individual stocks or REITS.
From what I've seen it's very, very rare that and emergency will require you to spend your entire 6 months at once. Even those long term emergencies like a job loss may not require all 6 months but let's say it does. Then you still have about 6 months or more you can pull out of your investment fund. Sure there may be a huge stock market dip right at the time you need that money but a couple of things. You can go years without ever reaching an event that requires more than 6 months of emergency. During that time you should have experience some growth in your investments via dividends and appreciation. So even if there is a dip when you need that money it likely doesn't dip far enough to touch your principle.
Anyways that's just my 2 cents.

[leopaul]

I consider an emergency fund as funds I keep at home. Good thing too. My only emergencies are family or friends who run into issues. I never consider it a loan because if they have to borrow than the'll never be able to pay it back. I'm a realist.

[DeeRuff]

Me personally I say it’s never enough. Even if you have 20k drop a few dollars in there still and just keep building

[colin]

"You can never mess up an Emergency Fund by having too much" - Dave Ramsey

Disagree. I certainly think that the size of emergency funds will vary individually based on things like personal comfort level and the stability of your job. But once you get past those thresholds it can become a drain to continue to put money in low yield savings accounts instead of investing that cash. So yea, too much can become a drag.

The standard rule of thumb is 3-6 months of living expenses. I opted to put aside the full six months largely because my income accounts for 80% of the household (and if I lost my position it'd be difficult to replace quickly). However, I additionally have a pile of cash that is routinely getting socked into indexed mutual funds in a taxable brokerage account. In a dire case where I needed cash greater than 6 months I could always sell those equities. But that'd be a pretty dire circumstance.

[deedeesaidso]

I am 2 payments away from finishing my debt snowball and being credit card debt free. I have $1, 000 in my emergency fund. I am doing the 52 week money challenge, and starting the 1k in 6 months challenge in July. I started sinking funds last month, and I am starting cash envelopes this month. I will be starting furthering 3-6 months for emergency funds

[truckerwifeonabudget]

You have to remember, he wrote total money makeover almost 20 years ago. 1, 000 had a little more buying power in 2003 than it does now.

[ilovegreen]

I’m starting to see every 10 years a crisis occurs. I’ve survived a recession, Global financial crisis, COVID. The larger the family the more money you need to save❤️❤️ nans rainy day fund is now an essential part of life for survival these days❤️

[tomj]

Perhaps I could add a little something as not only are my wife and I Gen-Xers but we've also experienced more adversity than most including serious injury, serious illness and multiple unemployment stretches, the longest by far being 50 weeks during the great recession. Six months is a good solid start for your emergency fund, but you'll definitely want to continue until you have 2 years of expenses. This is what it takes to weather such things as extended job loss and serious medical emergencies. During the great recession we were paying for COBRA insurance coverage and my wife needed emergency surgery followed by an 11 day hospital stay which very well could have ruined us if we hadn't paid for insurance (always have insurance) and we didn't have our emergency fund. Don't worry as the same frugal skills that help you build your emergency fund are the same ones that help you lower the bar as you've cut your expenses making the 2 year goal easier to attain. Just as important is protecting those funds by immediately cutting your spending down to nothing when adversity hits. Immediately after job loss when it became quickly apparent that new opportunities weren't available we cancelled our cable (which we were already thinking of doing as it had gotten too expensive and the programming was terrible) and began cooking every meal at home from scratch. We still do both to this very day not because we can't afford them but because both are better options while saving money...always find the solution that's both. Additionally you can also use credit cards as further emergency fund protection. We pay our cards in full every month, thanks in large part to our low spending. This past fall we had to replace our HVAC system due to it's age and I didn't have to touch our savings, here's how it worked. It took a little over a month to get bids, schedule the job and get everything installed. We received the invoice from the installer about a week later with a 30 day due date. I waited until our credit card cycle reset (a few days before the invoice due date) then paid the bill with our credit card. I received the credit card bill about 5 weeks later with a due date another 3 weeks away. This advanced planning gave us almost 4 months to save up for the bill before we had to lay out any actual cash. We used a bit of the cushion that we keep in our checking account, went into what I like to call "super savings mode" and easily covered the bill without touching our emergency savings. Now, just 6 months later we find ourselves in another "emergency fund" situation and our entire fund is still available if we need it but thanks again to our low spending, we haven't had to touch it, yet. It provides incredible peace of mind and I hope that everyone makes the excellent choice to build their own.

[ashleyb]

Great job bringing in outside resources. I was up to $1500 before this all happened but I couldn’t be more grateful for at least having that. Love your videos!

[dafeck]

I'm in my mid 30s, I'm now saving for an EF. I've been paying debt forever and now I'm debt free. I just have to have the mind set my 6-month EF goal is a personal debt so I can have have the same energy to pay it off (have it fully funded)

[RoseMary-vsio]

Job loss, pay cuts, yes, the car tyres and Furness should come out of a sinking fund under household, the last two are not unexpected, we know things wear down and could stop working so should not be taken as an emergency but planned for.

[jennybanana]

Great viedo, I wish I was as money savy when I was your age :-). To me a Emergency Fund is to be used in case of a job loss only, since I'm older it might take longer to find another job, so I saved one year of living expenses. It took me me a few years, but it makes me feel save. However for all other emergencies (like a flat tire or medical bills) I have sinking funds in place. Stay save!

[kevinrehberg]

Emergency Funds are what you consider what the needs are for..I support the underlying concepts.. rent... utilities... insurance...food... but the last year has shown us that 6 months isn't nearly enough..Especially if your finances are extremely tight..For those in the lower aspect, put away three years..First year in a CD Ladder, the remaining two years in liquid mutual and index funds..This is an "Emergency fund " right?? These are funds you won't frivolously dip into...

[NEVBB]

Great advice! I was saving for my down payment and had two years of savings at one time and it felt so good to have that vision. Now it’s much smaller since I’ve bought the property but you are right - find what makes you comfortable. 6 months is mine as well!