There's a reason it's so important to save up for emergencies. You never know when life might throw you a curveball, and if you're not prepared financially, you could instantly land in debt or face other disastrous consequences. For example, if you were to lose your job and fall too far behind on your mortgage payments, you'd potentially risk losing your home.
If you're sitting on $10,000 in your savings account, you might assume you're all set as far as your emergency fund is concerned. After all, that is a lot of money. But while $10,000 may be an appropriate emergency fund for some people, that may not be the case for you.
It's all about your personal expenses
You should aim to have enough money in your emergency fund to cover three to six months of essential living costs. Those include things like rent or mortgage payments, utilities, healthcare expenses, and food.
If your monthly essentials come to $2,500 a month, and you're comfortable with a four-month emergency fund, then you should be set with a $10,000 savings account balance. But if you typically spend $5,000 a month on essentials, which may be the case if you're a higher earner or have a large family, then $10,000 may not be adequate to buy you the protection you need.
In the event of job loss, for example, $10,000 in savings would cover two months of bills. But what if you work in a specialized field and it takes twice that much time to find a new job? In that case, you might easily blow through your savings and still be left in the lurch.
That's why you shouldn't set a random target for your emergency fund. Instead, you should base it off your personal expenses, and you can use an emergency fund calculator to figure out your specific savings needs.
Three months, six months, or somewhere in between?
For some people, three months' worth of essential living costs is a good emergency fund. For others, six months' worth of expenses is more appropriate. How do you know which end of that range you should aim for?
There's no single answer, so think about your financial situation. If you're married and both you and your spouse work, you may be okay with three months' worth of essential bills tucked away in savings, because if one of you were to lose your job, the other might still manage to bring in an income. On the other hand, if you're the sole breadwinner in a larger household, you may want to think about aiming for six months of expenses in the bank.
Similarly, if you're self-employed, you're generally not entitled to unemployment benefits in the event of job loss. In that situation, you may want to err on the side of saving more, even if you don't have any dependents.
Either way, run the numbers based on your specific bills to figure out a savings goal. You may end up landing on $10,000 -- but don't assume that if you've saved that much, you're automatically set.
FAQs
It's all about your personal expenses
How much money should I have in savings for emergency fund? ›
While the size of your emergency fund will vary depending on your lifestyle, monthly costs, income, and dependents, the rule of thumb is to put away at least three to six months' worth of expenses.
Is $10 000 a good amount of savings? ›
I typically advise keeping about two or three months' expenses in your savings at all times, so while $10,000 is a good amount to have, it can certainly always be higher.”
How many Americans have $10,000 in savings? ›
Majority of Americans Have Less Than $1K in Their Savings Now
| How Much Do Americans Have in Their Savings Accounts? | | |
|---|
| $501-$1,000 | 11.30% | 12.58% |
| $1,001-$2,000 | 10.60% | 9.81% |
| $2,001-$5,000 | 10.60% | 10.64% |
| $5,001-$10,000 | 9.20% | 9.51% |
4 more rowsMar 27, 2023
A fully funded emergency fund is an emergency fund that, according to experts, can cover 3-6 months of your living expenses. You can calculate your living expenses by totalling the cost of the essential expenses in your life. These include food, water, housing, transportation, utilities, insurance, and so on.
Is a savings account good for emergency fund? ›
Online savings and money market accounts are both well-suited for your emergency fund. In addition to insurance coverage from the FDIC or National Credit Union Association (NCUA), these accounts offer the most competitive interest rates on savings products.
What is a realistic emergency fund amount? ›
While experts generally recommend building an emergency fund equal to three to six months' worth of expenses, this is only a guideline. Calculating your personal emergency savings goal requires having a clear picture of your financial situation.
How much does a $10,000 CD make in a year? ›
Earnings on a $10,000 CD Over Different Terms
| Term Length | Average APY | Interest earned on $10,000 at maturity |
|---|
| 1 year | 1.81% | $181 |
| 2 years | 1.54% | $310.37 |
| 3 years | 1.41% | $428.99 |
| 4 years | 1.32% | $538.55 |
1 more row7 days ago
Here's what your returns on a $10,000 balance could look like
| 0.46% APY | 5.30% APY |
|---|
| After 1 Year | $46.00 | $530.00 |
| After 5 Years | $232.13 | $2,946.19 |
| After 10 Years | $469.64 | $6,760.37 |
Dec 30, 2023
To potentially turn $10k into $100k, consider investments in established businesses, real estate, index funds, mutual funds, dividend stocks, or cryptocurrencies. High-risk, high-reward options like cryptocurrencies and peer-to-peer lending could accelerate returns but also carry greater risks.
The average American has $65,100 in savings — excluding retirement assets — according to Northwestern Mutual's 2023 Planning & Progress Study. That's a 5% increase over the $62,000 reported in 2022.
How much does the average American have in an emergency fund? ›
The GBR study revealed that half don't have any emergency savings at all. Those who do are most likely to have $1,000 or less, which isn't nearly enough to get the typical household through a single month — or possibly even a single vehicle breakdown or home repair. Another 11% have between $1,000 and $3,000.
How much does an average American have in a checking account? ›
Average checking account balance by income level
| Income percentage | Account balance |
|---|
| 60-79.9% | $7,924 |
| 80-89.9% | $13,434 |
| 90-100% | $43,631 |
| National average | $8,814 |
3 more rowsApr 26, 2024
When asked how much money they'd need to save for a financial emergency to avoid additional stress, 40% would feel comfortable having a modest amount — below $2,500 — set aside. 21% say they'd need at least $10,000 saved to feel secure.
How much cash should you keep at home? ›
In addition to keeping funds in a bank account, you should also keep between $100 and $300 cash in your wallet and about $1,000 in a safe at home for unexpected expenses. Everything starts with your budget. If you don't budget correctly, you don't know how much you need to keep in your bank account.
How do you calculate a fully funded emergency fund? ›
Calculate Your Monthly Expenses
Multiply this total by the number of months you would like to have covered by your emergency fund. For example, if your monthly expenses are $3,000 and you want to save for three months, your emergency fund goal would be $9,000.
Is $20000 enough for an emergency fund? ›
While $20,000 may be more than what many Americans have in savings, it's not guaranteed to be an adequate emergency fund for you. Your emergency fund should be set up to cover at least three full months of essential bills. If your monthly expenses are high, you may need to save more than $20,000.
Is $5,000 enough for emergency fund? ›
Saving $5,000 in an emergency fund can be enough for some people, but it is unlikely sufficient for a family. The amount you need in your emergency fund depends on your unique financial situation.
Is $100 K too much for an emergency fund? ›
It's important to have cash reserves available, but $100,000 may be overdoing it. It's important to have money available in your savings account to cover unforeseen expenses. Plus, you never know when you might lose your job or see your hours (and income) get cut, so having cash reserves at the ready is important.
