3 Sure Signs You Need a Large Emergency Fund


A popular money rule is to have three to six months of emergency savings in your savings account. So if your living expenses are $5,000 per month, then a good goal would be $15,000 to $30,000 in your emergency fund.

While that works as a general rule, everyone’s financial needs are different. In some cases, it’s better to err on the side of caution, saving six to even 12 months of expenses. Here are the most common signs that you should aim for a large emergency fund.

1. You don’t have a stable income

If your income fluctuates from month to month, you’re not alone. Freelance and gig work is on the rise. In fact, 39% of the American workforce did freelance work in 2022, according to Upwork.

As every freelancer knows, it’s harder to manage your money when you don’t have a steady paycheck coming into your bank account. There’s also the risk that you have months where you don’t earn enough to pay your bills. You could lose a client, or not be able to work due to a medical issue. Sometimes it’s a double whammy — like if a medical issue keeps you from working and leaves you with an expensive bill to pay.

That’s where a large emergency fund can keep you safe and give you peace of mind. If you have several months in a row where you don’t earn as much as usual, you can use your savings to get by. If you also have an emergency expense during that time, such as a car repair, you’ll be able to cover it.

2. You’re supporting your family on a single income

It often makes sense for parents to bump up their emergency savings. When you have kids, financial security is a must. Your emergency fund is especially important if you have a single-income household, since you’re reliant on one income.

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When both parents have jobs, it’s easier to manage financial challenges. If your kid needs expensive dental work, you can split the cost between two salaries instead of one. And if one of you loses your job, it’s not pleasant, but at least the other one is still earning money.

If you’re the sole earner, you’ll need to cover any surprise expenses. And if you lose your job, your household income goes down to $0. In that situation, three months of living expenses probably won’t seem like much, and it puts a lot of pressure on you to find another job right away. With six months or more in savings, you’ll have time to look for a job you like.

3. You’re planning to make a major life change soon

Life changes are exciting, but they’re often expensive, too. Even when you’re prepared for them, they could bring their fair share of unexpected costs. For example, if any of the following are on the horizon, you may want to pump up your emergency fund:

  • Buying a home
  • Starting a family
  • Moving to a new city
  • Launching a business

Those are just a few examples, and they’re all situations where you could find yourself needing to tap your emergency savings. New homeowners are often surprised by how much repairs and maintenance cost. New parents go through the same thing (except they’re spending on diapers and childcare, not repairs and maintenance, at least from what little I know about babies).

Do your best to plan for the new expenses you’ll have after a big life change. And if possible, add to your emergency fund so you’re ready for anything you didn’t plan for.

Three months of living expenses is the minimum for an emergency fund. It won’t work for everyone, and you don’t want to end up in debt because you weren’t prepared enough. If your income fluctuates, you’re the sole earner for your family, or you have a major life change coming up, you’ll be much safer with an emergency fund that can last you at least six months.

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