A Six Month Emergency Fund & Beyond

Quick Look

  • An emergency fund larger than six months of living expenses isn’t always essential.
  • However, personality, life circumstances, the purpose of the fund, or other financial goals, may make an emergency fund larger than six months worthwhile.
  • We recommend building up to at least a six month emergency fund.

Something Larger than a 6 Month Emergency Fund?

In the Growth stage, you grew your emergency fund to between 3 and 6 months of living expenses. In doing so you provided the security you needed to have a solid financial backstop should something unexpected happen. If you continue to build beyond a 6 month emergency fund in the Independence stage, it will be due to some combination of the factors listed below.

Evaluate the factors below and use them as a guide to determine if and by how much to grow your emergency fund.


Based on personality alone, some may only feel secure with a year’s worth of living expenses socked away. For others a six month emergency fund is plenty.

There’s no right or wrong choice. However, if you choose not to grow your emergency fund beyond six months, take money you previously saved toward that goal and invest it in something likely to generate a good return over the long term (like a low-cost index fund etc.).

Purpose for Your Emergency Fund

If the purpose of your fund is only for truly unexpected emergencies – an auto repair, medical costs not covered by insurance, necessary but unexpected travel etc. – you may feel comfortable with a relatively smaller amount. But if you consider your fund for things beyond emergencies, a larger fund may be needed. For example, wanting the freedom to quit your job, take time off, go back to school, or cover emergencies for a loved one are all reasons you may want a larger fund. Only by considering the purpose of your fund, can you really determine how large it should be.

Changing Life Circumstances

As your life changes over time, it important your emergency fund evolves to fit these circumstances. Consider these examples of changing life circumstances:

  • Volatile Job: You’ve landed a great job! Unfortunately, you recognize it’s in a volatile industry where ups and downs, layoffs, or even company closures are common. While you have no plans to leave your job, it may be beyond your control.
  • Living on Your Own: Shortly after moving out of your parents house you wouldn’t have minded moving back in if your financial circumstances necessitated it. In other words, your parents acted as a financial backstop. But now, you’ve grown beyond that and couldn’t imagine having to move back in. 
  • Children or Other Financial Dependents: We all know that children are expensive. But financial dependents can also take the form of aging parents who can no longer live fully independently and need support. This could be in the form of in home care, someone to help with errands and more. Your emergency fund may be able to help bridge the gap.
  • Dual-income Household: Becoming a dual-income household is one of the few circumstances where your emergency fund can become smaller relative to your total household expenses. With two income streams, you’ve spread out the risk that all your income will disappear over night.

These are just a few examples of changing life circumstances. Some circumstances can change overnight whereas others evolve slowly over time. But whatever the circumstance, these life circumstances may necessitate a larger emergency fund than you previously planned for.

Other Goals

If your emergency fund account also holds money for other purposes – for example a home downpayment, home remodel, new car fund etc., it’s important to remember that as soon as you use that cash for those purposes, it won’t be available for emergencies. If your emergency fund account is split into clearly delineated buckets (some banks like Ally Bank and others allow you to do this), this may not be a problem. But if not, it may be wise to build up an “emergency fund” that is closer to a year’s worth of expenses to ensure all your needs and goals are met.

Take Action

Make a note that defines the purpose of your emergency fund and how large you want it to be. Finally, follow the next steps in your MoneySwell plan (logged in users only) to get closer to your goal.

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