Emergency fund: how much, and where to keep it

What it’s for

An emergency fund is money set aside for the unplanned things you can’t skip. The Consumer Financial Protection Bureau (CFPB) gives car repairs, home repairs, medical bills and a loss of income as common examples. A sale or a vacation isn’t one.

Surprises are normal. In the Federal Reserve’s survey of 2025, 59% of adults had at least one major unexpected expense in the previous 12 months, most often a car repair or replacement (30%), a home or appliance repair (22%) or a major medical bill (21%), with a median cost between $1,000 and $1,999. Yet only 55% had three months of expenses set aside, and 12% said they couldn’t cover a surprise $400 expense by any means.

How much is enough

The common guideline is three to six months of essential costs; that’s how MoneyHelper, the UK’s government-backed money service, puts it. The CFPB doesn’t give a number: it says the right amount depends on your situation.

Count only essentials, what you’d still have to pay if your income stopped tomorrow: housing, utilities, food, transportation, insurance and minimum debt payments. Then choose the months. The emergency fund calculator uses 3 with a steady job, 6 on contract or temporary work, 9 if you’re self-employed, and 2 more if yours is the only income in your household. With $3,000 of essential costs and a steady job, that’s a $9,000 target.

Where to keep it

The money should be safe and quick to reach. The CFPB says a bank or credit union account is generally considered one of the safest places to put your money. At an FDIC-insured bank, deposits are covered up to $250,000 per depositor, per bank, for each account ownership category, including savings accounts, money market deposit accounts and CDs; federally insured credit unions offer the same $250,000 standard coverage through the NCUA. In the UK, the FSCS protects up to £120,000 per person, per bank.

Compare accounts on the APY, the annual percentage yield, which banks must disclose in a common way. And check the withdrawal rules: the Federal Reserve dropped the six-transfers-a-month limit on savings accounts in 2020, but a bank can still set its own.

Where not to keep it

• Stocks and funds: they can lose value right when you need the money, and the FDIC notes that investments aren’t insured even when you buy them at an insured bank. Investor.gov advises against risky investments for goals five years away or less.
• Money market funds: despite the name, they aren’t money market deposit accounts. The FDIC points out that they’re securities and aren’t FDIC-insured.
• CDs: you may pay a penalty or give up interest if you withdraw before the CD matures, so they suit only money you’re sure you won’t need soon.
• I bonds: you can’t cash them in during the first 12 months, and you lose the last 3 months of interest if you cash them in before 5 years.

How to build it

Start where you are. The CFPB suggests setting a goal, then saving automatically, with a recurring transfer or by splitting your direct deposit between accounts, and putting all or part of a tax refund aside. Even a small amount can provide some financial security, it notes.

Here’s how the numbers work. With $2,000 already saved and $300 a month going in, the $9,000 target takes 24 months: starting in September 2026, you’d reach it in September 2028. When you have to use the fund, refilling it becomes the first job for your savings.