Nearly 4 in 10 Americans are concerned about their emergency funds. Here’s how to know if yours is enough

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The whole purpose of having a emergency fund it’s buying yourself financial protection when life throws you a curveball. That curveball could be the loss of a job, a home repair, a car that refuses to start, or a large pile of medical bills.

In a recent Survey of the CFP Board of Directors, 38% of respondents found the state of their emergency savings “very concerning”. AND that is concerning in its own right. The question is, are they You all ready with emergency savings? Or you need to make your own padding savings account a priority?

You need at least a three-month emergency fund

When it comes to what constitutes the ideal emergency fund, everyone is different. You may feel the need to have more savings if you have several children to support ea mutual to cover, while someone else may be comfortable with a lower level of savings if they are single and rent an apartment on a monthly contract they can break easily.

That’s why, at a minimum, you’ll want to make sure your emergency fund has enough cash to cover three full months of essential expenses. Beyond that, it’s really up to you whether you need to save more.

TO KNOW MORE: Emergency Fund Calculator

If you’re currently not sure if you have enough money in your emergency fund, check your spending for the past 12 months and see how much your essential monthly expense is. It’s important to do this exercise for the last 12 months, and not just the last month or two, because you may find some bills only go out once a year or once a quarter (think property taxes and life insurance awards). And those are expenses your emergency fund should account for.

So, let’s say you spend $3,200 a month on essential bills and have $5,000 in savings. Well, that’s not bad, and it’s a lot better than having no money saved up. But ideally, you should aim for a minimum of $9,600 in that situation. If you were to find yourself out of work and ineligible for unemployment, you wouldn’t even have enough money to cover your essential costs for two months.

Consider your personal comfort level

Let’s say you spend $3,200 a month on essential bills and have $9,600 in cash in the bank. At that point, you’ve hit the three-month mark, which is great.

But you may still want to consider increasing your emergency fund beyond that point if doing so brings you more peace of mind. Three months, unfortunately, is not a long time to find a job when you are forced to leave it. And if you get hit with a giant home repair, it could be enough to deplete your emergency fund, leaving you with no cash reserves to fall back on.

So while a three-month emergency fund is perfectly acceptable, you may want to aim beyond the bare minimum. This could really make it easier to get through a financial crisis if you go on strike.

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