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How Much Should My Emergency Fund Amount Be?

May 11, 2021

Disasters happen. You might have done everything else right: carefully budgeted your rent or mortgage, put aside a good amount of your paycheck into a retirement fund, negotiated the best deal on your car, and paid back your student loans as quickly as possible. You pride yourself in managing money, but then your car breaks down. A hurricane blows off your roof. Or, you get sick or injured, and your health insurance won’t cover the costs of an operation.

If you don’t have the emergency funds to fix damage or support yourself when your cash flow takes a hit, you could end up in a serious financial predicament. It’s imperative to have emergency savings, but that raises another question: how much should you have in an emergency fund? 40% of Americans don’t have $400 for emergencies, so how much is too much, and how much is too little?

The Right Emergency Fund Amount

There is no definite number everyone should have, i.e., $5,000. The right emergency fund amount for you depends on your income and overall financial situation. On that note, most experts say that you should have between three to six month’s living expenses stashed away to prepare for emergencies, though more is always wise (especially if you are a non-salaried worker who earns variable income). Save as much as you can each paycheck until you have a financial cushion you’d feel comfortable surviving on for a while.

Say you lose your job. You still have rent and other bills to pay, and you don’t know when exactly you’ll find a new position. That’s why having a few months’ worth of living expenses to fall back on is necessary because, without your job, everything you pay for will come out of your savings. Just make sure it’s the right savings, not another fund you were building up.

Does My Emergency Account Need to Be Separate?

There are all kinds of significant expenses to save up for, like houses, vehicles, education, and retirement. Many people consider tapping into their retirement or other savings when emergencies arise because, well, they have the money; they’re just spending it earlier than expected.

Don’t tap into your retirement fund if you can avoid it. Withdrawing from it too early could result in additional hardship in the future. You don’t technically need a separate emergency funds account, but it’s a smart thing to practice. Opening an account dedicated to emergency savings reminds you to replenish it whenever you use it. Plus, many kinds of savings accounts accumulate interest, so you can earn a bit of passive money that way.

Important Factors to Consider

When determining your emergency funds amount, keep the following factors in mind:

  • How easily can you get a new job with similar pay? — Depending on your field, you might be able to attain a new position if you lose yours pretty quickly, or it could take months of interviewing.
  • How expensive is your area? — Someone who lives in a rural area will spend less on living expenses than someone in San Francisco or New York.
  • How likely are you to experience an emergency? — This one’s a little up in the air, we know, because emergencies can happen to anyone. However, honestly reflect on how at-risk you are of specific crises. Do you have any medical issues? Is your car in top shape, or is it faulty? Are you in a disaster-prone area? How well is your industry doing? If your apartment or home is beyond repair, then you might need emergency moving funds.

You can also take advantage of an emergency funds calculator to help you consider various scenarios.

Can’t I Just Use Credit?

You’re probably wondering: if I’m in an emergency and don’t have the money to cover it, can’t I just use my credit card? You could, but doing so entails consequences. If something happens to your house and you need to pay $10,000 to repair damages to make it livable, that’s $10,000 that will accumulate interest. You’ll end up paying much more money in the long-run and could set yourself up for extra difficulty.

Some people may have no choice but to use credit, but if possible, it’s better to have cash to pay for emergencies. Personal loans can also be dangerous.

Saving Tips

We acknowledge it, saving is a privilege, and people who live paycheck to paycheck don’t often have spare change to put away. Save whatever you can, though, even if it’s only a few dollars per week. You’ll be in an even worse situation if an emergency happens that you can’t pay for in any capacity. A few savings tips include:

  • Tip Yourself with the Earnin app whenever you accomplish part of your routine (every time you do also qualifies you for a chance to win prizes);
  • Open a savings account that earns interest and put aside as much of your paycheck as you can;
  • Set goals: think about how much money you want to have saved and by when;
  • Reduce your unnecessary expenses by negotiating with your vendors and cutting back on superfluous spending.

Your emergency fund amount is up to you — just be sure however much you save is enough to take care of yourself for the foreseeable future or enough to make life a little easier when an emergency happens.


Photo by Jason Leung on Unsplash

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3NO PURCHASE NECESSARY TO ENTER OR WIN. Must be 18 years of age or older and a legal resident of the U.S. or DC. Games begin each Sunday starting 12/6/20 at 9:01 p.m. ET and end the following Monday at 9:00 p.m. ET with the last Game ending 12/19/21. To download the App, view the Official Rules, odds disclosures, prize details, and alternate means of entry, visit https://www.earnin.com/wewin/. Void where prohibited. $10,000,000 grand prize payable over 29 years. Sponsor: Activehours, Inc. (d/b/a Earnin), 200 Portage Ave, Palo Alto, CA 94306.

4Disclaimer: Up to 2 days early is based on comparison with traditional banks. Exact timing is dependent on your employer's payroll policies. For more information on eligibility and requirements of Earnin Express, visit earnin.com/TOS.

5Source: Internal analysis conducted by Earnin on December 10, 2020.

1Restrictions on use of Services and/or third party fees may apply, see Earnin.com/ privacyandterms for details.

2Balance Shield cash out is subject to your available earnings and daily pay period max. Other restrictions and/or third party fees may apply. For more information visit Earnin.com/privacyandterms.

3Tip Yourself Account funds are held with Evolve Bank & Trust, Member FDIC and FDIC insured up to $250,000. Tip Yourself is a 0% APY and $0 monthly fee service. Other restrictions and/or third party fees may apply, see Earnin.com/privacyandterms for details.

1Lightning Speed may not be available to all Community Members. Cash Outs may take up to thirty minutes, actual transfer speeds will depend on your bank connection. Restrictions and/or third party fees may apply, see Earnin.com/TOS for details.

2Restrictions and/or third party fees may apply, see Earnin.com/TOS for details.

3Balance Shield cash out is subject to your available earnings and your daily pay period max. Other restrictions and/or third party fees may apply, see Earnin.com/TOS for details.

4NO PURCHASE NECESSARY TO ENTER OR WIN. Must be 18 years of age or older and a legal resident of the U.S. or DC. Games begin each Sunday starting 12/6/20 at 9:01 p.m. ET and end the following Monday at 9:00 p.m. ET with the last Game ending 12/19/21. To download the App, view the Official Rules, odds disclosures, prize details, and alternate means of entry, visit WeWin Game & Sweepstakes Official Rules. Void where prohibited. $10,000,000 grand prize payable over 29 years. Sponsor: Activehours, Inc. (d/b/a Earnin), 200 Portage Ave, Palo Alto, CA 94306.

5Tip Yourself Account funds are held with Evolve Bank & Trust, Member FDIC and FDIC insured up to $250,000. Tip Yourself is a 0% Annual Percentage Yield and $0 monthly fee service. Your Tip Yourself Account and any Tip Jars are not Savings Accounts. For more information/details visit earnin.com/tos.

6Up to two days early is based on comparison with traditional banks. Exact timing is dependent on your employer’s payroll policies. For more information on eligibility and requirements of Earnin Express, visit earnin.com/tos.

7Your Max on Earnin Express is up to 80% of your payroll or $1000, whichever is less. The 80% is dependent on you routing your full paycheck to Earnin Express. For more information on eligibility and requirements of Earnin Express, visit earnin.com/TOS.

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1Disclaimer: Restrictions and/or third party fees may apply, see earnin.com/tos for more details. Lightning Speed may not be available to all Community Members. Cash Outs may take up to thirty minutes, actual transfer speeds will depend on your bank connection.

2Disclaimer: Lightning Speed may not be available to all Community Members. Cash Outs may take up to thirty minutes, actual transfer speeds will depend on your bank connection. Restrictions and/or third party fees may apply, see Earnin.com/TOS for details

3Disclaimer: Community Member must have had at least 1 successful debit with Earnin. Limit to 1 Max Boost per pay period. A boost will not adjust a Community member's daily max. Restrictions may apply, see earnin.com/tos for more details

*Disclaimer: Balance Shield Cash Out is subject to your available earnings and daily pay period max.Other restrictions and/or thirdparty fees may apply. For more information visit earnin.com/tos

1Restrictions may apply, see earnin.com/tos for more details. Tip Yourself Account funds are held with Evolve Bank & Trust, member FDIC and FDIC insured up to $250,000. Tip Yourself is a 0% Annual Percentage Yield and $0 monthly fee service. Your Tip Yourself Account and any Tip Jars are not Savings Accounts. For more information/details visit earnin.com/tos

2Disclaimer: NO PURCHASE NECESSARY TO ENTER OR WIN. Must be 18 years of age or older and a legal resident of the U.S. or DC. Games begin each Sunday starting 12/6/20 at 9:01 p.m. ET and end the following Monday at 9:00 p.m. ET with the last Game ending 12/19/21. To download the App, view the Official Rules, odds disclosures, prize details, and alternate means of entry, visit https://www.earnin.com/wewin/game-rules/. Void where prohibited. $10,000,000 grand prize payable over 29 years. Sponsor: Activehours, Inc. (d/b/a Earnin), 200 Portage Ave, Palo Alto, CA 94306.

3Disclaimer: Restrictions Apply. See earnin.com/wewin/pool-rules/ for more information

*Disclaimer: Up to 2 days early is based on comparison with traditional banks. Exact timing is dependent on your employer's payroll policies. For more information on eligibility and requirements of Earnin Express, visit earnin.com/TOS.

**Disclaimer: Restrictions and/or third party fees may apply, see earnin.com/tos for more details. Lightning Speed may not be available to all Community Members. Cash Outs may take up to thirty minutes, actual transfer speeds will depend on your bank connection.

*Survey conducted in February 2020 with 889 participants.

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