How big should your emergency fund be?

An emergency fund keeps you afloat when your regular income can’t. Here’s how much to save and how to start.

life preserver ring on teal background

The takeaway: Try saving at least three months’ worth of living expenses so you are prepared for a job loss or medical emergency.

When planning your emergency savings, consider:

  • Your costs for food, housing, medical needs, and other essential expenses.
  • Potential unexpected costs related to children or other dependents.
  • If you work in an industry with high turnover, or you have a serious medical condition, you may want to save more, such as six months of your monthly expenses.

The risks: Not having an emergency fund could lead to a negative financial spiral.

  • Without an emergency fund, you could find yourself taking on high-interest debt to cover your expenses such as daily needs, your mortgage, or rent.
  • If you’re unable to meet basic needs, you may have to make hard choices about which necessities to live without.

Two account types work well for emergency savings: We recommend choosing a cash account or investing account.

  • A cash account, like a savings account, is a low-risk place to stash your cash. At Betterment, our Cash Reserve account lets you earn interest on your savings and provides FDIC insurance up to $2 million ($4 million for joint accounts) through our program banks.†
  • An investing account can offer greater growth potential but in exchange, you take on more risk. If you go this route, we recommend an account that is in a majority of bond investments. Also, increasing your target savings amount will add a buffer against potential losses.

Set up an Emergency Fund goal with Betterment and we’ll provide a suggested monthly savings amount to help you reach your savings goal.

  • An Emergency Fund goal is designed for emergency savings. With an Emergency Fund goal, you can set a target savings amount and a target date which you can always adjust.
  • You can choose from either saving in a Cash goal or an investment account. We recommend choosing the one that best fits your personal risk level.
  • We’ll give you a goal forecaster tool to visualize how much you’ll need to save each month to hit your goal, but we recommend starting by saving what you can afford and increasing the amount over time.
  • Once you’re ready, create a recurring deposit, and you’ll start saving automatically.

Ready to build an emergency fund?

Open an Emergency Fund goal today.

Get started