An emergency fund is a savings account that you can use to stash cash for unexpected expenses. This fund allows you to hedge against unplanned costs and keeps you on track to reach your financial goals. Check out our emergency fund calculator below to see how much you need to save.
Two Goals for Your Emergency Fund
Saving for an emergency fund can feel intimidating, especially if you are in debt or saving for the first time. Here are the two emergency fund goals to aim for:
- Goal of $1,000: This should be your target if you are saving an emergency fund for the first time. Most Americans can’t come up with $1,000 in case of an unexpected or unbudgeted expense. A cash emergency fund of at least $1,000 will allow you to comfortably pay for unplanned expenses.
- Goal of $3,000: The watermark for emergency funds has risen for two reasons. The first is that it has been several decades since the $1,000 rule of thumb was established by financial professionals. The second is that rising inflation has deflated the purchasing power of $1,000. A $3,000 emergency fund is the old $1,000.
Unexpected expenses - like medical emergencies, washer/dryer malfunctions, urgent car repairs, and pet emergencies – can put a dent in your wallet and throw a fantastic financial plan off course. Budgeting for the unexpected by saving an emergency fund will help avoid financial setbacks.
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Quontic High Yield Savings Account
Smart Money Rating: 5/5
APY: 4.50%
Required Minimum Balance: $100
Emergency Fund Calculator
Use the calculator below to pick your emergency fund target. Then, you can add how much you already have saved for your emergency fund. Finally, you can plan out how many months you want to give yourself to reach your savings goal, and the calculator will estimate the corresponding amount you will have to save monthly.
Calculator
Emergency Fund Calculator
Where to Store Your Funds
One of the most common questions is where you should keep your emergency fund. While you might not be the type to keep $1,000 or $3,000 under your mattress, you should certainly be thoughtful about where you keep your money.
Storing your cash in an interest-bearing account will allow your funds to accumulate by taking advantage of compounding interest.
You can safely stash your emergency funds in a high-yield checking account or high-yield savings account. Keeping your funds in a high-interest account is smart because you can easily save funds over time while also earning interest income.
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Primis Checking Account
Account Type: Free Checking Account
Required Minimum: $1 to Open
Bonus Offer: Earn 50 Cents for Every Purchase
Frequently Asked Questions
You should use your emergency fund when needed. It’s okay to tap into it for unexpected expenses. When you do, you just need to focus on filling it back up. Add this line item to your budgeting system to fill your account to the brim.
Yes. Keeping your emergency fund in a separate savings account from your regular everyday checking or savings account will help you keep it for its indented use, emergencies only. Read more about how to open a savings account.
Stashing your emergency fund in a high-yield savings account is a smart money move because you can build your funds and earn interest at the same time.
First of all, congratulations. If you have saved $3,000, you are in great company. The next order of business is to set up a slush fund of three to six months of living expenses. Check out Smart Money’s slush fund calculator to play with your savings goals.
