Episode•December 6, 2022•7 min

Tiffany's Take: How Much Should My Emergency Fund Be? | Ep. 176

Every Tuesday, Tiffany answers one of your submitted questions. To submit a question for an upcoming episode, visit here: https://www.moneytalkwitht.com/asktiffany. Connect with Tiffany on Social Media Facebook: Money Talk With Tiff Twitter: @moneytalkwitht Instagram: @moneytalkwitht LinkedIn: Tiffany Grant This podcast uses the following third-party services for analysis: Podcorn - https://podcorn.com/privacy OP3 - https://op3.dev/privacy

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Key Takeaways

1
Start with a $1,000 baby emergency fund if you have nothing saved
Gives confidence that you can actually build savings
Use a savings challenge to reach $1,225 to cover the baby emergency fund
Celebrate hitting this milestone before moving to larger goals
2
Build to 3-6 months of expenses as your core emergency fund target
Calculate your monthly expenses using a budget first
Three months may be enough for stable job situations
Six months should be plenty for most people
3
A 12-month emergency fund is acceptable if it provides personal comfort
Emergency fund size is very personal and depends on your risk tolerance
Some clients prefer a full year of expenses for peace of mind
4
Use high-yield online savings accounts for emergency funds
Earn significantly more interest than traditional banks
Out of sight, out of mind helps prevent unnecessary withdrawals
Transfer delays (a few days) create a natural barrier to impulsive spending

Intro

Tiffany answers a listener question about determining the right size for an emergency fund in this episode of Tiffany's Take.
Tiffany Grant is a money nerd and financial coach who hosts the Money Talk with Tiff podcast.

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– Starting from Zero: The $1,000 Baby Emergency Fund

If starting from nothing, the first goal is to save $1,000. This aligns with Dave Ramsey's concept of a baby emergency fund, which Tiffany agrees with despite disagreeing with many of his other teachings.

It gives you the confidence that you can actually do this. And that's what I love about having such a small goal to begin with, is that once you hit that goal, you're like, oh, you know, I can actually do this.
– Tiffany

Tiffany offers a savings challenge on her website to help reach $1,225, which covers the baby emergency fund goal.

– Scaling Up: 3 Months, 6 Months, or 12 Months

Once past $1,000, aim for at least three months of expenses. Determine this by reviewing your budget to calculate monthly survival costs.

For those in stable positions, three months may suffice. The next target is six months, which should be enough for most people.

If you feel comfortable, because I have some clients where they're like, no, Tiffany, I need a year's worth. If that's what makes you comfortable... go to the year.
– Tiffany