Emergency assets: How much?

The size of your emergency fund will depend on your personal situation. Many people keep three to six months’ salary in reserve, but that’s a ballpark range. You’ll have to decide on an appropriate amount based on whom you support other than yourself and what your monthly expenses are.

For example, if you’re single with no dependents, and can readily move in with friends or relatives in a pinch, you might not need as substantial a cushion as someone that pays nursing home costs for both parents and has a young family to support. Deciding on a comfortable amount is something you can discuss with your professional consultant or planner.

In thinking about an emergency fund, you might also want to analyze how difficult it might be for you to find a new job at your current salary if you were suddenly in the market for employment. Or, if you have a two-income household, you might want to weigh the contribution of both parties in calculating how much you should keep available for a rainy day.

Louise Yamada,
Managing Director,
Louise Yamada Associates

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