I'm Buying a Home. How Much Emergency Savings Do I Need?

Buying a home is a huge undertaking. In addition to paying your mortgage, you'll also need to keep up with expenses like property taxes, insurance, and repairs. And it's the latter that should prompt you to build up a solid emergency fund.

But how much money do you need in emergency savings as a homeowner? There's no hard and fast rule, but there are certain guidelines you can use to land on the right number.

Make sure you're equipped to cover surprise expenses

Home repairs can pop up at any time, and they can range in cost from a few hundred dollars to many thousands of dollars for a single job. That's why you absolutely need to pad your savings account before purchasing a home.

Homeowners spent nearly $6,000 on home repairs and maintenance on average in 2022, according to Hippo. But that doesn't mean you should come up with a $6,000 emergency fund and call it a day. Rather, you'll want to think about factors such as:

• The size of your home
• The age of your home
• The state of your home

It's often (though not always) the case that the more space you have, the more potential there is for something to go wrong. Similarly, an older home is likely to have more issues arise in the near term than a newer one. And if you're buying a home that doesn't appear to have been maintained very well, you can bet on having to sink more money into repairs.

So where does that leave you as far as your emergency fund goes? As a starting point, you should always make sure to have enough money in savings to cover three full months of essential bills. The logic there is that if you were to lose your job, you'd be able to dip into your cash reserves to cover your expenses rather than immediately resort to borrowing money.

Also, if you have enough cash in the bank to cover three full months of bills, then chances are, it means you have enough money to cover one or two large repairs, or a series of smaller ones. So that puts you in pretty good shape.

However, if it's possible for you to boost your emergency savings beyond three months' worth of living expenses, then it pays to do so. And you could take a few different approaches.

You could assess your home, try to identify the things that are most likely to break first, research the cost of repairs, and add that sum to your emergency savings. Or, you could aim for a random but notable sum to add, like $5,000, which would likely go a long way toward addressing issues with your home. You could also decide to save up five, six, or seven months' worth of living expenses rather than only three, so you have that added cushion.

Don't let your home drive you into debt

Many homeowners land in debt when repairs arise that their savings can't cover. And that's not a situation you want to put yourself in. To avoid it, pad your emergency fund as needed, whether by estimating the cost of repairs and adding that sum to a baseline of three months of bills or simply settling on a large enough number to buy yourself peace of mind.