One of the most common financial planning questions is: “How much money should I have in my emergency fund?”
The answer depends on your situation – but one thing is certain: life is incredibly unpredictable. Job loss, medical bills, home repairs, or a car breakdown can happen at any moment. Without cash set aside, these events can quickly derail your long-term goals.
A good rule of thumb is to keep at least 3 - 6 months of living expenses in a liquid, safe account. For many households, aiming for the higher end of the range provides extra piece of mind.
- Dual-income households: 3–6 months may be sufficient since there are multiple income streams.
- Single-income households: Consider 6–12 months of expenses since there’s more reliance on one paycheck.
- Near retirement or variable income: Lean toward 12 months to protect against market downturns or income fluctuations.
- Accessible: In accounts that you have quick and easy access to: Savings & Checking Accounts – or in money market securities in your brokerage account
- Separate: Kept apart from day-to-day checking accounts to avoid spending it
- Safe: In cash or very high-quality cash like securities that are FDIC insured
An emergency fund isn’t about earning the highest return—it’s about creating a financial safety net that keeps your long-term retirement and investment plans on track if an unexpected cash need arises.
If you’re unsure how much you should set aside or how to balance saving for emergencies with investing for retirement, working with a fee-only financial advisor in Cary, NC, or a fee-only financial advisor in Chattanooga, TN can help you build a plan tailored to your needs.
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