How Much Money Should You Have in Your Emergency Fund? Here's What Dave Ramsey Thinks

The answer may depend on your situation.

Saving money for emergencies is one of the most basic financial goals everyone should set for themselves -- and should prioritize achieving. That's because no one is immune from emergencies, and having the money to cover them is important to developing security.

But how much money, exactly, should be invested for life's unexpected surprises? That's a tricky question. Many financial experts have weighed in on this issue -- including finance expert Dave Ramsey. Ramsey's answer isn't straightforward, though, as his advice on how much you should have saved for emergencies varies depending on the big picture of your financial situation.

Here's what Ramsey thinks is the right amount when it comes to emergency funds.

Start with a $1,000 mini emergency fund

Ramsey suggests saving up money for emergencies as the very first step toward taking control of your financial situation. He is famous for outlining "baby steps" that people should take in order to manage money effectively. And the first of his seven baby steps is to save $1,000 for an emergency fund.

Now, this may not seem like a lot of money. And, in fact, when Ramsey discussed the purpose of the $1,000 emergency fund on one of his shows, he acknowledged this wouldn't go very far -- especially in a real emergency where you lose your job or have a major car problem.

However, he still thinks this is a good amount to start with because, as he explains, the $1,000 "gives you a little bit of emotional margin. It just covers the little stuff that happens while you're learning to budget."

Ramsey explained that he initially recommended people prioritize paying off debt before saving anything for emergencies. However, this didn't work in the real world. "I kept having people in Financial Peace University have little things happen…little emergencies happen while people were broke and trying to get out of debt. And when they did, they emotionally couldn't recover and get started again on the debt snowball."

Because of this, Ramsey created Baby Step 1 because it "keeps folks on track," when they can cover at least some surprise costs as they work on accomplishing Baby Step 2: becoming debt free.

Build up to a three- to six-month emergency fund

Ramsey suggests devoting spare cash to debt repayment after saving up the $1,000 mini emergency fund. But after that, Baby Step 3 requires a shift in focus -- this time to building a "fully funded emergency fund."

So, what is a fully funded emergency fund? According to Ramsey, it means you have enough money in a savings account to cover three to six months of living expenses. "This will protect you against life’s bigger surprises, like the loss of a job or your car breaking down, without slipping back into debt," he explains on his blog.

While this may seem like a lot, Ramsey believes it's worth the effort and sacrifice to save so much because "having an emergency fund turns an emergency into an inconvenience."

Ramsey's advice about saving up enough to cover three to six months of expenses is echoed by many financial experts. And it's likely good advice -- especially during these uncertain times. By saving so much, you'll have the peace of mind of knowing that when something goes wrong, a small disaster doesn't have to cause long-term financial devastation.