This is one of the most common money questions: how much should I have saved for emergencies?
The problem is that this is a trick question.
How much you set aside in an emergency fund is a personal decision – something only you can decide, as it should be based on your own financial situation and what makes you feel good.
“The best answer is ‘it depends,'” says Jose Hernadez, a financial educator who founded Financial University and winner of NextAdvisor’s NextUp list.
Although there is no perfect answer, a few tips can go a long way. We asked dozens of experts how much money people should save for emergencies over the past two years – many sticking to the traditional advice: three to six months of expenses. With a potential recession and a wave of unemployment on the horizon, we began to wonder how much they were actually saving.
So we asked eight of our favorite financial experts about their own emergency funds – how much they’ve saved, where they keep their savings and what they think about it these days.
Although they each take a different approach, the takeaway is clear: an emergency fund can get you through unexpected and difficult situations, so it should be large enough to cover your basic living expenses for a while. period of time. Some experts say you can get away with spending a few months or less, but all would agree that saving something is better than nothing.
It’s hard to save money, especially if you don’t earn as much as you would like. But the experts we talk to suggest starting with just $1 a week. If you can increase that to $5, $10 or more each week, that’s even better. Even if you’re just starting to save, the good news is that high-yield savings accounts now pay significantly higher interest rates than last year.
Find out how these eight experts manage their emergency funds and what they want you to know about saving.
Krystal Todd is a CPA and a popular personal finance figure on TikTok who isn’t afraid to tell you how it goes when it comes to big financial decisions. That’s part of why she won’t hesitate to tell you that your emergency fund should be in a separate account from your other savings. If you keep your emergency fund separate, you won’t be as tempted “to withdraw some for non-emergency situations,” she says.
Amount of emergency fund: 9 months of expenses.
Where she keeps her emergency fund: Todd’s emergency fund is split into three tiers: 10% in Series I Savings Bonds, 10% in cash, and 80% in a high-yield savings account with Ally Bank. You can’t cash an I bond for at least a year, so it only makes sense if you have money you can put aside and won’t need to access in the near future . “It allows me to get a consistent return in the most risk-free assets, which will further increase my emergency fund, as well as having cash on me in case I can’t reach a bank but that I would always have the emergency,” she says.
Rita Soledad Fernandez Paulino
Life happens. Car accidents happen, loved ones get sick, appliances wear out, and sometimes employers fire people. Rita Soledad Fernández Paulino, a public school math teacher turned financial coach, experienced this firsthand when a health issue forced her to take sick leave just before the COVID-19 pandemic. That’s why you should “save for these circumstances in advance in a high-yield savings account,” she says.
Amount of emergency fund: $28,500, which covers three months of expenses for his family of four living in Los Angeles. Fernández Paulino has a second emergency fund for his family members. She’s got $100 in it right now, but she’s bumping it up to $5,000.
Where she keeps her emergency fund: She keeps her emergency fund in a high-yield savings account with Ally Bank because she loves its savings basket feature. She also keeps her sinking funds there, which are funds she intends to spend on specific expenses in the future. Her other emergency fund is in a savings account with a credit union near her home. “I keep the money there despite the low interest rate because if needed I can go there and withdraw the money unlike Ally which would require a one to three working day transfer to my checking account “, she says.
Jose Hernadez is a financial educator and founder of Financial University who believes access to cash should be an important part of everyone’s financial plan, regardless of net worth. The bottom line is that you don’t want to overdo it, according to Hernandez. “There’s definitely such a thing as having ‘too much cash,'” he says.
Amount of emergency fund: About six months of expenses.
Where he keeps his emergency fund: He keeps his emergency savings in a high-yield savings account. “One of the benefits of rising interest rates is that we’re seeing yields on high-yield savings accounts start to rise,” he says.
Daniella Flores, parallel hustle expert and founder of I Like to Dabble, knows that it can feel overwhelming if you’re trying to save for three to six months’ emergency fun because of the sheer magnitude of this number. That’s why they recommend breaking it down into smaller goals. Try saving your first $500, first $1,000, first $2,000, etc., and put them in a high-yield savings account that you can easily withdraw. They even recommend using visual or digital color trackers “to make it fun.”
Amount of emergency fund: $40,000 in a personal emergency fund and $15,000 in a business emergency fund.
Where they keep their emergency fund: Flores keeps his emergency savings for personal and business needs in high-yield savings accounts with a credit union, so they “don’t lose even more money to inflation.” . The percentage they earn in their high-yield savings account doesn’t completely offset rising inflation, but “it helps,” they say. They chose a credit union because they have low to no fees, reliable online customer service, and the bank’s profit share goes to customers rather than shareholders.
Julien and Kiersten Sanders
Many people underestimate the importance of achieving emergency fund financing in your financial journey. But Julien and Kiersten Sanders, the married couple behind Rich & Regular, say you shouldn’t because “the moment you do, there’s a huge sense of relief and comfort knowing you can soak up a lot of part of what life has in store for you”. Saving for emergencies is also a huge motivator that you can tap into to reach other, more challenging financial goals, they say.
Amount of emergency fund: Approximately two months of minimum spending in a high-yield savings account and funds in a taxable brokerage account that they can draw on if needed. In total, they have about three months of expenses set aside for emergencies. “With taxable brokerage, we accept the risk of knowing that the value may fluctuate due to market conditions, but given that we haven’t had to use it in a decade, we are comfortable with the compromise,” they say.
Where they keep their emergency fund: Most of their emergency fund savings are in an account with One United Bank, the largest black-owned bank in the United States. Although they recognize that there are more competitive savings account products, they are aware of other factors that are important to them. , like social justice issues and knowing that their money goes mostly to support black-owned businesses.
Shang Saavedra, the creator of Save My Cents, has a sound advice when it comes to an emergency fund: prioritize it above all else, even if you’re in debt. She recommends saving at least a month of expenses if you’re struggling with high-interest debt, like credit cards, to help break the cycle and stop living with it. She also notices that many people worry that their emergency funds are paying off big and want to “invest” it in a good bank. To that, she says, “Think bigger. That’s nothing to complain about.” An emergency fund ultimately acts as a buffer for life, so “just pick a high-yield savings account you like to use and move on. Your retirement funds are what you want to focus on,” she says.
Amount of emergency fund: A year of expense for several reasons: Saavedra and her husband are in high-income jobs where job searches can take longer than six months, and they can take advantage of the work option if needed. “The one-year emergency fund would act as our first-year living expenses while we convert our investments,” she says.
Where she keeps her emergency fund: Saavedra has several emergency funds spread over several bank accounts. Instead of keeping her emergency fund in a high-yield savings account, she uses regular checking accounts to take advantage of various bank bonuses. “That way we’re still earning interest, but in a different way than most people with high-yield savings accounts,” she says. “Because our emergency fund is quite large (over five figures), it allows us to qualify for quite sweet and substantial bank account opening bonuses.”
As a 36-year-old retired millionaire, Jeremy Schneider knows the value of a dollar. That’s why he recommends not spending too much time comparing high-yield savings accounts. Find a bank that matches your financial goals and run with it. “It won’t make you rich, so don’t invest,” he says. Online banks and credit unions generally have higher rates than large physical institutions. You’ll also need to consider other important factors, such as minimum balances and fees that could cost you money over time.
Amount of emergency fund: $10,000 to $20,000 in emergency savings and over $2 million in a non-retirement brokerage account that Schneider can tap into when he needs more money (emergency or otherwise).
Where he keeps his emergency fund: Schneider uses a Fidelity Cash Management account, which offers benefits such as free ATMs worldwide, check writing and bill paying. “It usually pays a competitive interest rate, so I don’t have to worry about switching from one high-yield savings account to another,” he says.