3 Reasons I Have a Larger Emergency Fund Than I Probably Need

SecureSave reports that 63% of Americans could not cover an unplanned $500 expense out of their savings account. And that's problematic, as it means the majority of U.S. adults are vulnerable to taking on credit card debt in the event of a financial shake-up.

As a general rule, it's a good idea to have enough money in emergency savings to cover three to six months of essential bills. This amount of savings could get you through a period of unemployment or cover larger out-of-the-ordinary bills, like home or vehicle repairs.

I, however, have a 12-month emergency fund. And a lot of people would probably say that's overkill. But here's why I insist on having enough cash in the bank to cover my bills for a full year.

1. I'm self-employed and not eligible for severance or unemployment

When you're a salaried employee, you're generally eligible for unemployment benefits should you lose your job through no fault of your own. You may even be entitled to severance pay on top of that.

As a self-employed writer, I have no such back-up plan. Even if I'm doing a great job and lose some gigs solely due to budget cuts on the part of my clients, I'm not entitled to any sort of severance or government benefit. So I need extra money in savings because of that.

2. My income is variable to begin with

People who work as salaried employees take home the same paycheck every payday. I don't. My income can vary tremendously based on different factors, some of which I can't control.

For example, if a client of mine decides they don't need my services one month when they normally throw me $2,000 worth of work, that's probably a month where I'll make $2,000 less. Or, if I get the flu and need to spend five days in bed getting over it, that's five days of work I'm missing. And I don't get paid sick days. So my emergency fund needs more cash in case there's a month when I end up working and earning a lot less than anticipated.

3. I need the peace of mind

Some people I know have parents or relatives who help them out financially when they run into a jam. Last year, for example, my friends had to put on a new roof and didn't have the savings, so their parents bailed them out.

I have no such arrangement. Because of this and my aforementioned job-related circumstances, I need extra savings for peace of mind.

You'll often hear that it's a problem to overfund your emergency savings because you give up higher stock market returns. And it's true -- if I were to cut my emergency fund in half and put 50% of that money into stocks, I'd probably earn a lot more on that portion over time.

But sometimes, it's okay to forgo earning higher returns on a modest amount of money if that helps you sleep better at night. So I consider my larger emergency fund an investment in my peace of mind.

Find the right number for you

In the course of building your emergency fund, you should aim to be able to cover three months of essential bills at a minimum, and six months' worth for more robust protection. Whether you opt to save beyond that point is up to you.

But think about your financial circumstances when making that call. If you have variable income and are self-employed, it's reasonable to pad your emergency fund -- especially if doing so helps alleviate your financial anxiety and does good things for your mental health.