Emergency Fund Essentials: How Much You Really Need and How to Build It

Summary: An emergency fund provides a financial lifeline when the unexpected happens and takes careful planning to build.

With change all but constant in life, building an emergency fund can bring you peace of mind and help you thrive in the long term. With careful financial planning, your emergency fund can become a lifeline to confront unexpected expenses, job loss, or other unforeseen circumstances.

But how big should your emergency fund be? And how can you go about saving money for it? Here’s a look at the essentials.

The importance of an emergency fund

You never know when you will need to dip into an emergency fund. Unexpected costs may arise from time to time. Some are minor, such as a plumbing emergency or car fixes, and may not make a huge dent in your finances. While others are life-changing, like a medical event or sudden job loss. These can wipe out your bank account.

A majority of people in the United States don’t have enough money saved to pay for relatively small surprises, not to mention major ones.
According to a 2024 Bankrate survey, less than half of U.S. adults could pay out of pocket for an emergency costing $1,000 or more. Instead, many people use credit cards or borrow money from friends or banks. Going into debt makes it more difficult for people to prepare for the next big-ticket problem. A well-financed emergency fund provides peace of mind as you navigate the uncertainties of life.

Having an emergency fund ensures that you can calmly weather such storms. It lets you maintain a healthy financial standing and your financial independence even during an upheaval. Because whether big or small, life’s curveballs tend to keep on coming. It’s up to us to protect our finances by preplanning for them.

How much should you have in your emergency fund?

There is no hard-and-fast rule for the size of your emergency fund. However, financial professionals recommend that you keep the equivalent of three to six months of living expenses.

This advice can vary depending on several factors, such as job stability, health considerations and family circumstances. For example, a couple with two jobs and no kids might choose to keep less money in their emergency fund, while a single-income household with multiple children might save more.

It’s important to think of an emergency fund as separate from your savings. For retired folks in particular, an emergency fund is the assurance that firefighting a financial crisis will not eat into retirement savings that will support you for the years to come.

How to build your emergency fund

Start building your emergency fund by following a few simple (but not always easy) steps.

  1. Make a plan: Decide how much money you intend to save and by when. Figure out the number of months you have, and calculate how much you’ll need to save per month. Consider working with a financial advisor to help you create a strong plan.
  2. Budget: Create a detailed budget and follow it. The goal is to live below your means so you have extra to put away each month into your emergency fund.
  3. Automate: Set up automatic transfers from your checking account to your emergency fund account. Think of it as a non-negotiable expense like your phone or electric bill.
  4. Stash unexpected income: Any time you get money you weren’t expecting, such as a tax refund, a gift, or a work bonus, put it directly into your emergency fund account.
  5. Earn extra money: If possible, find time for side gigs to earn a bit of extra income to bolster your fund. For example, consider selling unused clothes and household items on sites like Poshmark and eBay.
  6. Keep your fund full: Once you’ve saved a solid emergency fund, move on to saving for other priorities like retirement. But remember to prioritize topping up your emergency fund if you dip into it to pay for unexpected costs.

Building an emergency fund takes time, so it’s important to stay focused on solid financial planning and keep on saving. Your future self will thank you for working hard to help ensure smooth sailing during turbulent times. At Mutual of Omaha, our trusted advisors can help you protect and plan your financial future.


Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc., Member FINRA/SIPC. Investment Advisor Representatives offer advisory services through Mutual of Omaha Investor Services, Inc. Note: Not all Mutual of Omaha agents/producers are financial advisors.