Question 1

How big should my emergency fund be?

Accepted Answer

A common guideline is 3 to 6 months of essential expenses, kept in cash or a high-yield savings account. Lean toward 3 months if you have very stable income and few dependents, and toward 6 or more if your income is variable, you're self-employed, or you're a single earner supporting others. Multiply your monthly expenses by the number of months you want covered to get your target.

Question 2

What counts as an emergency expense?

Accepted Answer

An emergency fund is for unexpected, necessary costs — a job loss, a major medical bill, an urgent home or car repair. It is not for planned spending or wants. Base the target on your essential monthly expenses (housing, food, utilities, insurance, minimum debt payments, transportation), not your full discretionary budget.

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