How much should I have in an emergency fund?
Keep 3–6 months of essential expenses in a high-yield savings account. For a household spending $5,000/month on essentials, that's $15,000–$30,000. Single income? Go to 6 months. Dual income with stable jobs? 3 months is adequate.
Formula
Emergency Fund = Monthly Essential Expenses × (3 to 6)
Example
Monthly essentials: $3,200 rent + $600 food + $400 insurance + $500 transport + $300 debt minimums = $5,000. Emergency fund target: $15,000 (3 months) to $30,000 (6 months) in a HYSA.
How it works in detail
Your emergency fund covers the unexpected: job loss, medical bills, car repairs, home emergencies. It should be in a liquid, safe account — a high-yield savings account (HYSA) earning 4–5% APY is ideal. Don't invest it in stocks (could be down when you need it) or lock it in CDs. How much depends on your risk profile: single earner or variable income → 6 months, dual stable income → 3 months, self-employed or commission-based → 6–12 months. Count only essentials: housing, food, insurance, transportation, minimum debt payments. Not entertainment, dining, or subscriptions.
Calculate your ideal emergency fund size based on your spending
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How much do I need to retire?
Multiply your annual spending by 25. If you spend $60,000/year, you need $1,500,000. This is the 4% rule from the Trinity Study (1998) — withdraw 4% annually with a 95%+ historical success rate over 30 years.
What savings rate do I need to retire early?
At a 50% savings rate, you can retire in roughly 17 years. At 65%, about 10 years. At 75%, about 7 years. The relationship is logarithmic — your savings rate matters far more than your income or investment returns for determining time to financial independence.
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