How Much Emergency Fund Should I Have?
It is important to answer the question “how much emergency fund should I have?” so that you aren’t taken by surprise when an emergency does happen. But before we get into specifics, the conventional wisdom is that you should have three to six months of expenses covered by your emergency fund.
What’s an emergency fund? Well, let’s say you have sudden, unforeseen expenses like maybe an unexpected layoff, a surprise health issue, car breakdown, or so on. These expenses may be stressful, but let’s say you prepared and have been saving some cash on the side little by little. That would be the emergency fund that helps cover you in the event of such unplanned situations.
Figuring Out How Much Emergency Fund I Should Have
”How much emergency fund should I have?” is a pretty common question. Like all financial decisions, context is important. If you already have vast amounts of wealth, you probably don’t need to worry about having an “emergency fund” in the same way that average Americans do.
Nonetheless, for most people, an emergency fund forms an indispensable part of a dependable financial plan. The best time to prepare for an emergency is right now — as the old saying goes, “By failing to prepare, you are preparing to fail”.
But how much exactly should you have set aside? Well, that depends, once again, on context — that is, your particular situation.
Conventional Wisdom
To answer the question "how much emergency fund should I have?", the conventional wisdom about how much to save in your emergency fund is three to six months’ worth of expenses. This means that, before investing in stocks, bonds, or other investments, you have first established an emergency fund that covers you for three to six months in case of unexpected financial hardships.
If you’re in good health, have little to no debt, live in a low-cost area, pay rent, have a reliable car, can easily find a new job if you lose yours, do not have kids or dependents, have job security, and have a partner or other family you can depend on for financial help, then three to four months’ worth of expenses is probably enough.
However, if you’re in poor health, have debt, live in a higher-cost area, own a home, don’t have a reliable car, can’t easily find a new job if you lose yours, have children or other dependents, lack job security, and cannot depend on others for financial assistance, then you should aim for at least six months of emergency expenses to be safe.
Saving all the way up to a year is recommended for people with higher incomes, specialized jobs that might necessitate relocation, people with multiple dependents, and people nearing retirement or who are already retired.
You might very well be a blend of these different criteria. The important thing is to assess all the factors so you can make an informed decision about how much money you should set aside for your emergency fund.
How To Build Your Fund
Once you've answered the question "how much emergency fund should I have?", you might be wondering how to start. Here are a few smart approaches to take, once you’ve calculated how much should roughly be in your emergency fund:
- Create a savings goal – calculate how much per month you would need to save over a given span of time (maybe 3, 6, 9, or 12 months) to establish your emergency fund.
- Automate your savings – people who automate savings are much more likely to succeed long term in stashing money away. Figure out how much you can comfortably save each month, then use your bank (online/app) to set up recurring deposits into your savings account.
- Take advantage of opportunities to save – Let’s say you stumble across some money — maybe an unexpected inheritance or generous gift, or you get a larger tax refund than you expected, or so on. Put a hefty portion of these funds in your emergency fund so that you can hit your goal sooner.
Ultimately, it’s up to you how much you save and how you do it. It’s important to establish a plan though to ensure financial security for yourself and any dependents you might have.
Use A Nevada Title Loan For Extra Help
In some cases, it doesn't matter how well you figure out the question of "how much emergency fund should I have?". Sometimes getting a loan might be necessary to deal with an emergency like unexpected unemployment, health issues, or other emergency expenses you cannot handle alone. If you need a loan, you might consider a title loan.
A title loan is a loan that requires you to use your vehicle’s lien-free title as collateral. This can be helpful for people without good credit, as all kinds of credit are considered. Plus, a title loan doesn’t have complicated requirements. And the best part is you can get the cash on the same day – if you get approved.
Get A Title Loan In Nevada
Getting a title loan in Nevada Title is simple. It starts online and then you just visit one of our many title loan locations all over Nevada. Just follow our quick guide below:
- Fill out our online form to get started. Your information will be sent to the nearest location and a loan representative will call you back with further instructions.
- Gather your driver’s license or state-issued ID, your vehicle’s title, and the vehicle. Come down to have your items assessed and your vehicle inspected to determine how much you could qualify for.
- They will quickly determine if you qualify for approval. If you are approved, we will help you finish the paperwork and hand you the cash you qualify for – which could be anything up to $15,000.
When you are going through emergencies, it is important to have your emergency fund set up. But while nearly everyone should work to establish an emergency fund that’s appropriate for their situation, a title loan can come in handy in situations where you lack enough funds. Fill out our online form when you are ready to get started.
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.