Decide How Large Your Emergency Fund Should Be Using Recommendation 3-6-9
You need an emergency fund, no doubt about that. On the other hand, how much money this fund should have depends on who you ask . Most experts say 3 to 6 months, but that’s a pretty big jump. To better understand where you fall on the spectrum, try recommendation 3-6-9.
Spending three, six, and even nine months is a reasonable amount to save in case of an emergency, but it depends very much on what your finances look like. Here’s what LearnVest suggests to figure out which rule of thumb works for you:
When three months of home wages may be enough
Are you a proud tenant, can only feed your mouth, have a stable salary and can return to your childhood bedroom if needed? Then it may be sufficient to have a three-month salary in the emergency fund. In fact, the lack of liability for mortgages or minor children makes having a reserve fund for more than three months a pleasant thing, but not necessarily mandatory.
When a six-month wage for a home might be enough
Are you married, have children, own a house in the suburbs, and receive two stable salaries? Consider setting up a contingency fund equivalent to six months of the earning salary of the highest paid member of your household. Married, no children, but have a mortgage? The same rules apply.
When may a salary for 9 months be required
If you (or your spouse) is a self-employed or full-time freelancer, the chances are that your income is less predictable … In short, the more unpredictable your income, the more you can lose a chipped tooth or chipper.
It goes without saying that this is just a general guide to help you navigate. If you’re unsure of how much to save in an emergency, this is a good rule of thumb. LearnVest also offers more details for each scenario, so be sure to check out the full post at the link below.
3-6-9 Guide to Disaster Savings | LearnVest