- Financial planners say three to six months of expenses is till a good emergency savings target.
- But, if you’re self-employed or in a high-turnover job, consider saving up to one year of expenses.
- To build savings fast, put child tax credit and paused student loan payments in your emergency fund.
- Read more stories from Personal Finance Insider.
When the pandemic hit in March 2020, I felt a sense of panic settle into my life. I was terrified of getting sick, scared that I’d lose clients and my business (in the wedding industry), and nervous about the unknown state of the world.
One of the things that made me breathe a little easier was knowing that I had a decent amount of money in my emergency savings account. After getting laid off from my full-time job in 2015 and officially going out on my own as a solopreneur, having an emergency fund was a necessity. I knew I needed to have money stashed away that could be used in case of big life challenges, business problems, or unplanned expenses. I began putting $100 a month into that emergency fund and increased it over time as I was able to.
Experts advise that single earners save a minimum of six months’ worth of expenses, and those in double-earner families save a minimum of three months of expenses. However, after the pandemic made people tap into their emergency funds (or savings account in general), I began to wonder if financial experts would recommend putting even more in those funds.
Here’s what financial experts shared when I asked them whether people should increase the amount in their emergency funds in case of another pandemic or emergency.
1. The amount you save is personal
When it comes to how much to have in your emergency fund, a person should make that decision based on the state of their finances.
Jason Dall’Acqua, a financial planner, says your emergency-fund balance should be based on your specific situation and risk tolerance.
“A general rule of thumb is to keep three to six months of living expenses in an emergency fund, but this is just general guidance,” says Dall’Acqua. “If you have very high job security then you may not need a large emergency fund balance, but if you are in a position with high turnover or if you are self-employed, then it might make sense to have a larger emergency fund, such as one year worth of living expenses.”
2. There’s such a thing as saving too much cash
When you’re planning out how much money to put into your emergency fund savings account, Dall’Acqua says that it might not be good to have too much cash in that account.
“Be careful not to have too much money sitting in…
Read More: 3 Things to Do With Your Emergency Savings to Prepare for an Emergency