Would you be able to handle an unexpected expense, such as your car breaking down? Image source: Getty Images.

Americans' lack of emergency savings is frightening. According to a recent survey by Bankrate.com, about 28% of American adults -- nearly 66 million people -- have no emergency savings whatsoever. And a separate report from the Federal Reserve showed that 47% of Americans couldn't handle an unforeseen $400 expense without selling something or borrowing the money.

Experts often recommend that you set aside six months' worth of expenses, which seems like a lofty goal for many Americans. However, you may not really need six months' expenses saved up in order to cover most financial emergencies.

So how much do you need?

Pinning down your emergency savings goal

The money in an emergency fund needs to be readily accessible, and it should be reserved solely for unforeseen expenses. Retirement accounts are not suitable emergency funds, because you'll need them to support you in the future, and raiding them ahead of schedule can have serious long-term consequences. Nor can you rely on the money you would make by selling an illiquid asset like your car or home, because it could take you weeks or months to get your hands on that money.

Six months' worth of expenses is a great goal to aim for, as that amount can see you through an extended period of unemployment or cover a large one-time expense. However, that doesn't mean you need to save up every dollar you would normally spend in a six-month period; you can leave certain spending categories out of the calculation. For instance, when you're going through financial hardship, you're not likely to take vacations, go on shopping sprees, or dine out three nights a week.

In other words, you should budget for six months of your essential living expenses, including (but not necessarily limited to):

  • Rent or mortgage payment
  • Utilities
  • Insurance
  • Property taxes
  • Groceries
  • Credit card payments (for the purposes of an emergency fund, just include the minimum payments)
  • Wireless service
  • Car payment
  • Transportation
  • Any recurring payments not mentioned here (pest control, security system, etc.)

When you add these up, you may think it's impossible to save that amount -- at least within the next decade or so. However, the good news is that you may not need quite so much.

How much do you really need?

Do you really need six months' worth of expenses in emergency savings? Maybe, but maybe not. If you're just getting started, anything you can manage to save is better than nothing. But there are some other factors to consider when establishing a savings goal.

For example, if you have a home equity line of credit or a brokerage account (not a retirement account) that you can borrow against in a pinch, then you may not need quite as much cash in the bank. And if you live in a two-income household, then it's far less likely that you'll end up entirely without income. The reduced risk that comes with two breadwinners can lower your saving needs.

On the other hand, if your job is not all that stable -- e.g., if you're a freelancer, or you work in an industry that's prone to layoffs -- then you should have more in savings. The same goes if you have extra financial responsibilities (like supporting children) and liabilities (like frequent health issues or an aging home).

The bottom line on emergency savings

The exact amount of money you should have in savings is highly dependent on your personal situation. No matter how financially secure you may be otherwise, I always suggest having at least three months' worth of expenses. But if you have a particularly unstable or risky situation, your ideal savings amount could be a year's worth or more.

Keep in mind that you don't need to get there overnight. If you're building up an emergency fund from scratch, it's OK to start slowly. If all you can handle is, say, $30 out of each paycheck, then start with that amount. Over time, you'll get used to putting that money straight into savings, and it'll be easier to increase your savings rate over time. The important thing is that you start building an emergency fund as soon as possible. You never know when you'll need it.