How big should your emergency fund really be?
“Three to six months of expenses” is a start, not an answer. Here’s how to size a cash reserve for your actual life.
Ardent Editorial Team
An emergency fund is insurance you pay for with lower returns. Too little and a surprise forces you into debt; too much and your money quietly loses ground to inflation.
Adjust for your situation
- Two stable incomes: three months may be enough
- One income or commission-based pay: six to nine months
- Business owners and freelancers: up to twelve months
- Retirees: one to two years of spending outside the stock market
Where to keep it
High-yield savings accounts and money-market funds are paying well right now. Keep the reserve somewhere you can reach within a day or two, but not so close that it gets spent on a whim.
This article is general education, not personal advice. Talk to a qualified advisor about your situation.