What Is the Minimum (In Months) of Gross Income That Is Recommended for a Safety Savings Account?

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No matter what job you hold or what type of work you do, it's essential to have a solid emergency fund in place. You never know what the future will bring, and not having a cushion in place when you lose your job is an invitation to financial disaster. While you are working, it is your responsibility to protect yourself and your family by setting aside some money from each paycheck to build your emergency savings account.

Minimum Fund

In his book The Automatic Millionaire, author David Bach recommends that all workers have an emergency fund equal to three months of living expenses. But Bach also points out that more is better, so if you can save six months, nine months or even a year's worth of gross income that gives you an even bigger cushion. The key is that the money is set aside only for emergencies, and it should not be used for any other purpose.

Job Security

In some ways the optimum size of your emergency savings account depends on the security of your job. If you work for an organization that is very profitable and has never had a layoff, chances are your job is safer than most. That does not mean you do not need an emergency fund, but it does mean that you can probably get away with one on the low end of the recommended range.

Monthly Expenses

Some people choose to build an emergency fund based on their monthly expenses, rather than their monthly gross income. This can be a better measure of the amount of money you need to see you through the loss of a job or other financial emergency, especially if you are used to living within your means and spending less than you make. If your monthly gross income is $3,000 but your monthly expenses are only $2,000, building a cushion of three to six months of living expenses can provide you with a real level of protection.

Build Over Time

Many people are so intimidated by the size of the emergency fund they need that they simply never get started. That paralysis can be costly when you lose your job, so it is important to get started and build your emergency fund over time. One of the easiest ways to start is to split your direct deposit between your regular checking account and the savings account earmarked for your emergency fund. That makes saving money painless by taking the decision completely out of your hands.