Many people make financial New Year’s resolutions, such as reducing their debts or contributing more to their retirement accounts — both of which are certainly worthy goals. But among those who planned to make a financial resolution for 2023, the primary reason was the desire to build an emergency savings fund, according to a December 2022 study by research firm Morning Consult.
Factors such as economic concerns and the sharp rise in inflation seem to be driving this greater interest in building an emergency fund. But it’s extremely valuable to maintain this type of fund in any economic environment. An emergency fund can help you prepare for a temporary job loss or early retirement, or pay for large home or auto repairs, sizable medical bills and other needs.
So, how much do you need to keep in an emergency fund? The answer depends on your stage of life. If you’re still working, you might want at least three to six months’ worth of living expenses in your emergency fund. If you’re already retired, however, you may need at least three months’ worth of expenses for emergencies, plus another 12 months’ worth of expenses, after accounting for your other sources of income, to cover your everyday spending needs.
