How much should you have in an emergency fund?

How to size an emergency fund, where to keep it, and how to build one step by step.

An emergency fund is money set aside for surprises — a job loss, a car repair, a medical bill. It keeps a bad month from turning into credit card debt. Here is how much to aim for and how to build it. The usual target Most planners suggest three to six months of essential expenses. Essentials are the bills you must pay even in a crisis: housing, food, utilities, transport, insurance, and minimum debt payments. Leave out things you could cut, such as eating out or subscriptions. Three months or six? Three months may be enough if your household has two steady incomes and few dependents. Aim for six months or more if: Where to keep it Keep your emergency fund safe and easy to reach, but separate from your everyday account so you are not tempted to spend it. A high-yield savings account is a common choice: it pays interest, is usually government-insured up to a limit, and you can move money out within a day or two. Avoid keeping it in stocks. Markets often fall at the same time as job losses, and you may have to sell at a loss. How to build it Several months of expenses can feel out of reach, so break it into steps: Emergency fund or debt first? If you have credit card debt, build a sm…