Decide How Big Your Emergency Fund Should Be With The 3-6-9 Guideline

Decide How Big Your Emergency Fund Should Be With The 3-6-9 Guideline

You need an emergency fund, there’s no doubt about that. How much cash should be in that fund, on the other hand, varies depending on who you ask. Most experts say between 3-6 months, but that’s a pretty big jump. For a better idea of where you fall on the spectrum, try the 3-6-9 guideline.

Piggy bank image from Shutterstock

Three, six and even nine month’s worth of expenses are all reasonable amounts to have saved for an emergency, but it very much depends on what your finances look like. To figure out which rule of thumb works for you, here’s what LearnVest suggests:

When 3 Months of Take-Home Pay May Be Enough

Are you a proud renter, have only your mouth to feed, have a steady paycheck and could always move back into your childhood bedroom if necessary? Then having three months’ worth of take-home pay in an emergency fund may be sufficient. Essentially, not bearing the responsibility of a mortgage or minor children makes having an emergency fund of more than three months a nice thing to have — but not necessarily a must-have.

When 6 Months of Take-Home Pay May Be Enough

Married with kids, own your home in the ‘burbs and have two steady paychecks coming in? Consider building up to an emergency fund equivalent to six months of the take-home pay of the highest earner in your household. Married with no kids but still have a mortgage to pay? The same guideline applies.

When 9 Months of Take-Home Pay May Be Needed

If you (or your spouse) are self-employed or are a full-time freelancer, chances are higher that your income is less predictable…In a nutshell, the more unpredictable your income, the more you could find yourself thrown off by a chipped tooth or fender bender.

It should go without saying that this is just meant to be a general guideline to get you in the ballpark. If you’re not sure how much to save for an emergency, it’s a good rule of thumb to follow. LearnVest offers more detail for each scenario, too, so be sure to check out the full post at the link below.

The 3-6-9 Guideline for Emergency Savings [LearnVest]

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