Here's How Much to Keep in Your 'Rainy Day' Fund

It's an essential – but often overlooked – part of your financial well-being...

Your emergency fund.

Over the past year, we've shared many tips on the best ways to build your emergency fund, including how to keep it safe, keep it growing, and how to spend it. But a recent reader e-mail reminded us to share one of the most basic pieces of advice...

How much cash do you recommend keeping in a rainy-day fund? I've heard everything from three months to a year. Thanks. – K.J.

Typically, financial planners recommend having about three to six months' worth of take-home pay in your emergency fund. We've even seen some recommendations for as much as nine months' worth of pay saved.

Before deciding on how much is best for you, consider the following:

1. Who needs to survive off my income? If you're single with a reliable job, you don't need to save as much... But if you're married and only one partner has a job (even a reliable one), you should have more in savings. That's because in the event of a job loss, you'll have to pay bills for two folks instead of one. Married folks where both spouses have reliable jobs don't have as much of a risk.

2. What are my monthly expenses? If you don't know how much you spend per month, take time this week to sit down and figure it out. Include bills for your home (like rent or a mortgage, utilities, homeowners' association fees, property taxes, and insurance), as well as car payments, taxes, medical expenses, and living expenses (like groceries).

3. How secure is my job and how quickly could I find a new one? This one's tricky. Some fields hire regularly, but others might not. Networking is a great way to increase your visibility, and keeping in touch with connections will help if you ever need to find a new job. And although age discrimination is illegal, we know several folks 50 and older who had a lot of difficulty finding a new job due to their age and being "overqualified."

4. What assets could cause an unexpected cost? In addition to job loss, sudden problems like car or home repairs often require the use of an emergency fund.

According to travel giant AAA, the average car repair costs around $600. Some costs, like replacing the catalytic converter, run upwards of $1,000.

Home costs are often even worse. According to, some of the most common repairs can add up to thousands of dollars...

For example, small roof repairs run a few hundred dollars. However, costs for replacing an entire roof can be anywhere from $5,000 to $10,000. Similarly, fixing an air-conditioning unit or furnace typically runs about $300, but a full replacement is anywhere from $4,000 to $7,000.

So it's important to understand exactly what your insurance will or will not cover. Likewise, know your warranty terms and how long they last. And keep up with regular care and maintenance to avoid bigger problems down the road.

5. Is my health in order? According to the Kaiser Family Foundation, the average family health insurance plan deductible is about $1,500.

And for 2022 Medicare, the Part A deductible is $1,556 and the Part B annual deductible is $233.

If a sudden accident or illness hits you or one of your family members, can you afford to cover the associated costs? If you're still working, a good solution for this is to open a health savings account ("HSA"). If you aren't able to open an HSA, make sure to factor these costs into your emergency fund.

Finally, make sure that your emergency fund is kept in easy-to-access accounts. These include checking and savings accounts, certificates of deposit, and money-market accounts. The idea is to be able to get the funds quickly with little or no penalty fees.

Online emergency-fund calculators can help, but make sure to use ones that account for all five of the above points. And we suggest using more than one and averaging the results. You can start with this one from NerdWallet, and this one from Practical Money Skills.

Once you calculate your emergency fund, make sure to maintain it and change the allocation as your needs change.

That's the long answer to your question, K.J. How much someone needs in their emergency fund varies depending on their situation. But in general, somewhere between three and six months will be plenty. More than that, and you're letting a lot of cash sit in an account earning next to nothing instead of putting it to work.

Keep reading for the rest of this week's Q&A...

Q: Six years ago, I woke up morning after morning with stiff fingers. Two months passed without any change, so I went to a VA clinic for evaluation. They told me it was arthritis. X-ray pictures confirmed the diagnosis. VA proscribed a daily dose of naproxen to alleviate the arthritis. A year later I missed drinking a daily can of Coke Zero each evening and soon noticed morning finger stiffness went away. A light bulb lit in my head; maybe Coke Zero is doing that.

Having a few cans of Coke Zero in the refrigerator, I thought I might as well finish drinking those. Immediately the arthritis came back. That confirmed that Coke Zero was the cause of my arthritis. Since then, I have not drunk Coke Zero or any product with artificial sweeteners and my hands are arthritis-free. Keep telling everyone to say away from artificial sweeteners. Artificial sweeteners are not a natural food our bodies can digest. – R.D.

A: Thanks for sharing your story, R.D. Congrats on figuring out what was causing your stiffness and for being proactive about cutting soda out of your diet. Any time we tell folks to stop drinking soda – regular or diet – we get swamped with hate mail. And we get it... These drinks are addictive.

According to one survey, nearly half of Americans drink soda every day. And drinking them is one of the most damaging things we do to ourselves. Sodas increase inflammation, damage healthy gut bacteria, lead to high blood pressure, cause diabetes, and hurt your sex drive.

So our advice is... don't drink any soda. R.D., we hope your story can inspire some people to follow this advice.

For folks who missed the recent battle in our war on soda, catch up here.

We're interested to know if any readers are trying to kick a soda habit this year... or if you've successfully done it already. Tell us your story at [email protected].

Q: So, what you are saying Doc, is that your prescription is a daily DOSE (dopamine, oxytocin, serotonin, and endorphin) of happy hormones. Enjoyed your article. – B.B.

A: We couldn't have said it better ourselves, B.B.! A daily dose of happy hormones is exactly what this doctor is ordering. We're only a few weeks into winter, but it's already a stressful one for lots of people around the world. So we want to remind folks that improving your health this year, physically and mentally, is just as important as growing your wealth. If you want to read some of our favorite ways to feel happier and less stressed this winter, check out our most recent issues on the topic here:

Surviving Like a Scandinavian
Don't Let the 'Winter Blues' Get You Down

What We're Reading...

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig and the Health & Wealth Bulletin Research Team
January 7, 2022