Having an emergency fund with three months’ worth of total expenses is a good starting point, as this amount can typically cover a few medium or one to two large, unexpected expenses. For those working, three months is also the median duration of unemployment, as well as the typical waiting period in disability insurance policies. Aiming for three months as a minimum, consider increasing your desired savings if you feel that you’re at a higher risk of unexpected expenses or temporary loss of income, or you want additional comfort that you'll be able to weather emergencies.
If your risks are high or your comfort with risk is low, you may benefit from saving more than six months of expenses in your emergency fund. Going above six months can further increase your ability to weather emergencies. However, having too much in cash could make it more challenging to achieve your other financial goals, particularly if you have limited savings and are juggling multiple financial goals. A financial advisor <link "financial advisor" to FA Locator> can help you weigh the benefits and tradeoffs of having a larger emergency fund.
When it comes to building savings and paying off debt, <link "paying off debt" to it’s advisable that you don’t neglect saving for your other goals in the process. You can choose to build your emergency fund first, pay your debt first, or move forward with both at the same time. What’s important is that you’re making progress toward your goals. While it’s helpful to have accessible cash for emergencies, you may not need to fully fund your emergency fund if you’re still paying down high-interest debt, for example, or not saving enough for retirement (especially if your employer offers a match on retirement contributions).