Emergency Fund Essentials

DID YOU KNOW?

A 2017 GOBankingRates survey found that more than 1/2 of adults have less than $1,000 in savings

Here are some basics about emergency savings from experts at GOBankingRates, America's Money Smart Family, and the Bureau of Labor Statistics:

What constitutes an emergency?

  • Experts recommend that you plan savings for the following emergencies:
    1. Medical emergency
    2. Home Repair Emergencies
    3. Emergency Travel (e.g. family funeral)
    4. Job loss
    5. Car Repair/Replacement

How much should one ideally have in emergency savings?

  • Financial experts recommend having enough in your savings to cover six months worth of expenses
  • According to the Bureau of Labor Statistics, annual household spending in the U.S. is $57,311. Based on that amount, the average emergency fund should be $28,656.
  • A recent article from America's Money Smart Family calculated that an an emergency fund should be anywhere from $20,000 to $50,000 for a family of four

Where should one keep his/her emergency money?

  • A money market account
    • There will ideally be a large amount of money and you need your money to be relatively easy to access
    • You'll get a higher interest rate than a simple savings account, and the high balance required will discourage you from taking the money out for non-emergencies.
  • For health emergencies, you would be able to use money that you save tax-free in a Health Savings Account (HSA), which is offered by many employers.
    • If you do use an HSA to save for health emergencies, be sure that the account allows money to roll over from year to year.
  • To learn more about savings, please visit our Saving 101 page.