One topic that I feel is approached as a cut and dry personal finance mantra is save up to 6-12 months of living expenses in your emergency fund. Perhaps I’m the only one struggling with this figure for various reasons, but I also think that individuals trying to correct their past financial mistakes see this as a road block to ever being able to move past their debt with this huge figure looming over their heads.

I like to view my emergency fund as just that; money to be used in case of an emergency. When I think of an emergency, I don’t think of losing my job (I’ll explain this in a moment), instead I think of an unexpected car repair, vet bill, or insurance premium. One reason I view these items as “emergencies” is they are truly unexpected. Here are a few “emergencies” I’ve encountered over the past year:

  • Vet bill – Last summer I casually switched cat food on my cats. That equated to a $400 vet bill. It wasn’t an expected expense, so I used a portion of my emergency fund to pay the bill.
  • Car repair – Last Christmas I backed up into a car while pulling out of my sister-in-law’s driveway. Since our insurance premium is $1,000 and the bill came to under $900, we paid for it in cash using our emergency fund.
  • Insurance premium – Recently, we had a small oil fire in our kitchen. Thankfully, nothing except the oil burner caught fire and the fire extinguisher came in very handy! I didn’t have to dip into our fund at all, but had we experienced a loss of any kind, our renter’s insurance premium would have been $1,000.

Maybe my fund should instead be labeled “unexpected expenses.” Either way, the most I need saved in this fund would be around $3,500.

One reason I don’t count a job loss as an emergency is that I don’t  have a steadfast 9-to-5 job that generates one stream of income. I’ve diversified my sources of income and count on any two or three in a given month. If I were dependent on one source of income, then perhaps saving 3-6 months of expenses would be a good rule of thumb to follow. But even then, most people can rely on unemployment benefits to cover some of their expenses. And, I think many people see the demise of their job before it actually happens giving them a little head start on searching for a new job.

So why do many proponents of emergency funds chant 6-12 months of expenses as a nice round figure? Most likely because they assume obtaining a job with a comparable salary will take that long, especially given the economy right now. But how long will saving 6 months of expenses take? Let’s say your income is $5,000 monthly. Your expenses are $4,500. You save $500 every month with the goal of saving $27,000 for a nice 6-month cushion. With interest rates hovering around 1.7%, it would take a little over 4 years to save that 6-month emergency fund.

I know I’m going against the grain on this topic, but I propose saving 3-months of expenses for that ever debated emergency fund amount. I’m making the assumption that most people foresee a job loss approaching and can start planning ahead before they actually get the ax. My second assumption is that most people qualify for unemployment benefits that can pad their emergency fund while looking for a new job. So given my two assumptions, using the same figures, a person would only have to save $13,500 in their emergency fund taking a little over 2 years to meet that goal. This seems much more palatable.

I know many people won’t agree and think saving 6 to 12-months is a much safer alternative. But I don’t like steadfast figures; things change, people take different paths and don’t always follow the formula laid out by many middle-class Americans in the buy a house by X age, make X amount a year, have a baby by X age, and retire when you are 55 or 65.

Maybe I’ve always been going against the grain and am just now realizing it.

What are your thoughts? Does the amount of the emergency fund depend of the individual’s circumstances? Or should the ER fund amount be a steadfast rule of thumb?


  1. I would say you can never have enough emergency funds saved up! But then this is all about your comfort level. Everyone’s situation is different.

    What would be dangerous is if you don’t have any funds reserved for an emergency!!

    • @MoneyCone – I definitely think people need some amount of money saved up. But everyone is different and I think that some people get scared off by the whole 6 – 12 month range and feel defeated before they even start. That’s why I say 3-months is good (for a start anyway!) Of course, the more you have saved, the better. But couldn’t you be making more money on your money having it in other places? maybe that will be my next post.:)

      @Krantcents- I agree that it’s a personal choice and based on individual circumstances. As long as there is cash available to handle emergencies, and cash being saved for retirement, that’s a great start.

      @First Gen -I think that’s great that you are thinking of using it for your kids’ education. If there’s enough there and still enough to handle emergencies by the time they go to college, that’s great!

      @Retireby40 – I think that’s going to be my next post; where to put the extra cash after having a solid ER fund of 3 months saved. I like earning more interest than just my pitiful 1.4% in my savings. 😉

  2. A lot depends on your personal circumstances. I don’t have a specific “emergency” fund, however I have no debt except for a small mortgage. We are a two income (RN & Teacher) family with our children grown. It does not mean we don’t have savings, retirement and cash flow to handle unexpected situations. It works for us.

  3. Miss T @ Prairie Eco-Thrifter Reply

    I agree. Everyone is different and what they want to save up is up to them. We are targeting a 3 month goal to start and then we’ll assess.

  4. I have an emergency fund but I also justify having a big one because I figured that if am lucky enough to not have to use it, I could someday use it to fund my children’s education.

  5. retirebyforty Reply

    With 2 income, I think 3 months e fund is good enough. We keep 3-6 months in e fund and if we see investment opportunities, then we’ll draw down to invest. Then build back e fun later.

  6. youngandthrifty Reply

    6-12 months is quite a bit (thats a lot of money tied up that could be doing something better, like raking in the dividends). I think 3 months is reasonable.

    I would also use my emergency fund for the same reasons as you, not just for job loss, but for unexpected expenses.

  7. Depends on individual circumstances, doesn’t it? If one lives in a small house that’s fully paid for, than rent/mortgage expenses just don’t figure. So one person’s 3 month emergency fund is another’s six month fund.

  8. Absolutely, I have a child with advanced medical issues. One of our biggest considerations in our emergency fund is are his health issues.

  9. I agree that everyone needs a differently sized emergency fund. Personally, my minimum necessary would be $5,000. I am considering buying a house in a few years and who knows what extra expenses that would come with, so I would rather be prepared with a 12 month emergency fund. I currently have 6 months of expenses saved and will slowly work up to 12 months over the next few years since right now, I haven’t had much need for it. I haven’t touched the funds in my emergency fund since last May when I had to foot the bill for a month worth of a work trip myself before getting reimbursed!

  10. I too go against the grain on emergency funds. But, I believe everyone is in a different situation and should save accordingly. For us, we have several streams of income and no “debt”, so, 6-12 months in a checking/savings account is inefficient for us. It is not to say we don’t save our money – it just isn’t earmarked as an “emergency fund”.

  11. It also depends on how flexible you can be in the case of an emergency. Can you change cities to get a new job? Can you move back in with your parents?

    I think the most important part is just to put some thought into it, and then pick a goal and stick to it!

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