3 Signs You Need Way More Than a 3-Month Emergency Fund

It's important to have money in a savings account at all times for unplanned situations. Those could run the gamut from losing your job to having to put a new roof on your house.

Last year, SecureSave reported that 63% of Americans could not cover an unplanned $500 expense by tapping their savings. That's really a shame, because it means that a lot of people are in a precarious financial situation.

See, at a minimum, it's a good idea to have enough emergency savings to cover three full months of living expenses. But in some cases, even that's not enough. Here are a few signs that you should aim for an emergency fund that's well beyond that point.

1. You have an upper-level or unique job

The reason it's advisable to have at least a three-month emergency fund is that it might take time to find a job following a layoff. But while you may be able to replace a lost job in three months if you do something fairly common, like work in retail or serve as an office bookkeeper, if you have more of a unique job, it could take a lot longer to get hired following a layoff.

Similarly, if you're an upper-level manager or VP, it could take a really long time to find work if you're downsized out of a job. That's because there may be only one position of that nature at companies that are similar to yours, whereas with a lower-level job, there may be several positions being staffed simultaneously. So if you doubt your ability to replace a lost job within three months, then it's a sign that your emergency fund ought to be far more robust.

2. You have a home or car that's on the older side

Every home or vehicle owner should have cash reserves for unexpected repairs. But if your car or home is older, then you may want to aim higher than a three-month emergency fund.

Let's say you're in a newer home with updated appliances. You might encounter a smaller repair if parts of your sprinkler system get damaged or if your deck needs some boards replaced. These are common things.

But if you're in an older home, you might have to replace your air conditioning system and water heater in short order. If you want to avoid racking up a credit card balance and you don't want to be forced into signing a loan (which may be expensive to sign right now due to where interest rates are at), then your best bet is to pad your emergency fund.

3. You're a parent

When you have kids, it's wise to have extra emergency savings for a host of reasons. First, the more people there are in your household, the more likely you may be to get stuck having medical bills to pay. Kids also tend to get hurt. Sometimes, all it takes is a couple of emergency room visits in a single year to deplete an otherwise healthy savings balance.

Also, you never know when your daycare center might close due to financial or staffing issues, forcing you to take a break from work in the absence of being able to secure alternate care. So if you're a parent, it's a good idea to have an emergency fund that can cover more than three months' worth of bills.

Building a three-month emergency fund is a great starting point. And in some cases, it may be enough. But if any of these situations apply to you, you may want to aim higher so you're truly protected financially.