How much should you have in your emergency fund? 3 financial experts weigh in

Image Source: Getty Images

These expert tips can help you decide how much to save.

Key points

• Having an emergency fund is crucial to avoiding debt and protecting your finances.
• You will need to decide how much money to put in your emergency fund.
• Different financial experts have offered various advice on the subject.

Everyone should consider having an emergency fund at a high-performing company. savings account where money is accessible. An emergency fund is crucial to avoiding financial disaster in the event of a drop in income or unexpected costs. Without one, you may not be able to keep paying bills or cover unexpected expenses without using a credit card or otherwise go into debt.

But how much should be in your emergency fund? This is a tough question to answer, but hearing what the experts have to say might help you make an informed decision about what you need to save for a rainy day.

Here’s what three finance gurus think you should book.

This is what Suze Orman says you should have saved

Suze Orman is more conservative than many other financial experts when it comes to how much to save for emergencies. She recommends a larger emergency fund that provides more protection.

“Her long-term goal is to have eight months of living expenses set aside in her emergency fund,” Orman said. “I know it’s a lot, but I want you and your loved ones to be okay if you’ve ever been laid off or made sick for an extended period of time.”

He acknowledged that it could take a long time to save that much, but he recommended working on it over time and starting as early as possible to try to build up savings. “The important thing is that you are starting to save today and therefore each month you will get closer to your goal,” Orman said.

This is what Dave Ramsey says you should have saved

Dave Ramsey’s advice on an emergency fund is a bit more complicated. In fact, he has suggested a different amount of savings depending on your overall financial situation.

“If you have consumer debt, I recommend that you first save an initial $1,000 emergency fund,” Ramsey said. He made this suggestion so you can focus on paying down debt but also have something to fall back on so you don’t get caught in a cycle where you make progress on debt but then have to borrow again as soon as something unexpected happens.

But, once you’ve paid everything you owe, Ramsey’s suggestion comes a little closer to Orman’s. “Once you’re debt-free, it’s time to increase that amount and save three to six months of expenses in a fully funded emergency fund,” Ramsey recommended.

This is a wide range, but Ramsey did give some follow-up advice, suggesting that if your job is steady or you have two incomes in your household, you may err on the side of a smaller fund. But for those with less stable incomes, including the self-employed and people who work on commission, a bigger fund is needed.

This is what Mark Cuban says you should have saved

Finally, billionaire investor Mark Cuban has similar advice to Ramsey, though he errs on the side of a larger fund.

“If you don’t like your job at some point or you get laid off or you have to move or something goes wrong, you’ll need at least six months of income,” Cuban told Vanity Fair.

Ultimately, it’s up to you whether you want a three-month fund, a six-month fund, an eight-month fund, something in between, or even a larger amount saved. But the bottom line is that while there is no agreement on how much to save, the important thing is to set something aside to protect your future.