Should I have an emergency fund? How much should I put in my emergency fund? Is it bad to use my emergency fund?

I get those questions a lot… and the answers are always yes and it depends times two.

First, having any money in an emergency fund – I don’t love that phrase – is better than having nothing. Any dollar you have when you really need it helps.

The second question has no simple answer that works for everyone. Although if you Google it, you’d think there was an easy answer. I’ve seen amounts from $1,000 to $5,000, or three to six months’ worth of salary. It’s hard to figure out which one is right.

Because none of them are.

Your situation matters.

Third, it’s not bad to use your emergency fund when you need to. That’s what it’s there for. But using it because you overspent last month or because you forgot you needed an oil change – technically those aren’t emergencies and not what this money is for. The point of this separate cash pile is to use for true emergencies, expenses you couldn’t see coming. Like fixing your car after a fender bender. Or paying the many co-pays for an illness or injury. Or taking your fur baby to the vet if they get sick or hurt. And if you’re in a space where you’ve depleted your whole emergency savings and need to rebuild, it can feel impossible. But it’s not. That’s where I am right now.

My year of using up my emergency savings

During my medical debacle of 2022, I ran through all of my emergency savings. I even used up my pet emergency savings to pay my medical bills. And it felt horrible.

But it’s what I had to do. I couldn’t work, so I had less money coming in. My expenses suddenly skyrocketed: I needed round the clock care because I was completely bed bound. I had to hire people to walk my dogs, clean my house, and do all of the stuff I would normally do. Plus doctor bills, lab tests, medical procedures… it all added up to a drained emergency fund.

Now that my life is getting back to normal, rebuilding those savings is top priority. It’s slow going, but it’s happening. And like I said before, having anything in there is better than nothing. Every dollar helps.

Because of my last year, I’m aiming for a much bigger emergency fund than I had before. But that’s not right for everyone.

Why It’s Harder to Rebuild

For a lot of people (me included), it’s harder to rebuild emergency savings than it was to do it in the first place. And there are a bunch of reasons for that:

  • Paying down credit cards that you had to use for the extra expenses after you used up savings
  • Ongoing expenses from the emergency
  • Limited ability to bring in money because of the situation
  • Bigger tax bill because you had to use some retirement money
  • Post-emergency financial anxiety makes it harder to deal with money

These all just make it harder to put money in savings. So start really small, just to get something in there. It will probably take longer than you want to build that balance. And it may feel stressful looking at how little there is now. But honestly any amount you can start with… even if it’s just a few dollars a month… will bring you closer.

How Much Do You Need in your Emergency Fund?

Here’s the truth about how much you need to put in your emergency fund: As much as you can. But to put a number on it, three months of essential living expenses. And when I say essential expenses, I mean how much survival costs. That means:

  • Rent or mortgage payment
  • Food
  • Medicine
  • Transportation (like gas for your car or transit passes)
  • Childcare
  • Utilities

You know what’s essential in your life. And it may not be the same as what’s essential in my life. So take a look at your regular expenses and don’t include anything you don’t actually need to survive.

If you’re the only source of income in your household, you may want to stash more cash. If no one else depends on you, you may want to stash less. It’s really about what works for you.

After my emergency last year, I’m aiming a little bigger. I was surprised by how much I had to shell out for medical care. And I want to be more prepared if something else happens in the future. 

It’s personal, how much you need. You need enough to make you feel comfortable and enough to cover things for a while if you suddenly had no money coming in.

How Can You Realistically Save That Much Money?

When you think about saving up $8,000 or $12,000 or $15,000 it can seem impossible. I mean, honestly, thinking about that feels so daunting that it might make you feel like there’s no point in even trying.

So don’t think about that end point.

Focus on the starting point: How much can you put away regularly right now?

If you can save $50 a week, $150 a month, $2 a day… whatever you can manage, do that. And automate it so it always happens and you never forget. Because any amount in that account will help when you really need it.

When you can manage more, bump it up. And revisit that auto savings periodically to make sure you are saving as much as you can (without driving yourself nuts and feeling completely deprived).

Using Your Emergency Fund Means You Succeeded

I don’t really like calling it an emergency fund. Because that sounds reactive… and it’s really something proactive. The “when you really need it” fund is a better description, but I don’t think that’s going to catch on.

And a lot of people feel like they’ve failed when they pull money from it. I know I did. I felt like I was doing something wrong when I was using up my emergency fund. But the truth is that it was a success. Because that’s what the money is there for: to actually use it when you need it.

When you have an unexpected expense, and you can cover it without filling up your credit cards. That’s a financial win. That is not a failure. That’s 100% a success.

And if you have financial anxiety – like I do – knowing that money is there helps.

So the takeaways here:

  • Aim for three months of essential expenses in your emergency savings
  • Focus on how much you can put in rather than the end goal
  • Automate your savings
  • Use it when you need it – that’s what it’s there for

And most important: Using your emergency fund is a financial WIN, not a failure.

I show you how to build your emergency savings back up, as well as how to survive and even prep for any financial emergency in my Financial Recovery Workbook.

This book provides a step-by-step guide to help you make a plan to get your financial life back on track. I use these techniques regularly with my clients, and I’ve used them myself when I’ve gone through financial disasters.

Click on the button below to learn more and get your copy now.

If you still need help figuring out your safety number or how to get there, contact me. I offer financial anxiety coaching along with my other services. Together we can figure out what will work for you and the best way to build it up. I promise, it’s much easier when you have someone on your side helping you through.