How Much Money Should I Have in My Emergency Fund?

General advice recommends that you have 3-6 months of living expenses saved. However after what we've experienced in the past year, I'm starting to lean more towards 6-12 months.

The reason is because there's few things that can bring more stress than finances. I know this because I've been there. I started my business in the middle of the pandemic and not everything went according to plan and as a result, money was very tight.

And in that situation, having a bigger emergency fund would have helped in so many different ways. I'm not saying everyone's going to start a business, but think about the things that *could* happen in your life.

What if you lost your job? Or your car broke down and it cost several thousand dollars to fix so you could be able to go to your job? Or a summer storm hits and you have to replace your roof?

My point is, anything can happen at any time and an already stressful situation can be made less stressful by being financially covered.

And an emergency fund serves a couple purposes:

  1. Helps cover unexpected expenses
  2. Helps you begin to build your financial foundation

The second purpose is just as important as the first because when you have a fully-funded emergency fund, you can begin doing more fun things with your money.

All of that to say - a standard emergency fund should consist of 3-6 months of your living expenses and if you're able to, try and aim for 6-12 months.


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