The Average American With an Emergency Fund Has This Balance. How Does Yours Compare?

You'll often hear that it's important to have money in your savings account for unexpected bills, or to get through a period of joblessness. Without emergency savings, you might otherwise end up with costly credit card debt, and that's something that has the potential to ruin your finances for many years.

A recent New York Life survey found that among Americans who have an emergency fund, the average amount saved in it was $16,776.18. But is that what your emergency fund should look like? Not necessarily.

Your emergency fund is all about you

Your emergency fund should be set up to get you through a personal crisis. As a general rule, it's advisable to have enough money in emergency savings to cover a minimum of three months of essential living expenses. For added protection, you could aim for six to 12 months' worth of bills. That's a good goal if you have a household full of dependents and you're the only one who works and earns an income.

Now, it happens to be that the typical American with an emergency fund has $16,776.18 saved up. But that doesn't mean that's the most appropriate amount for you to save. 

Rather, what you'll need to do is take a look at your essential expenses and see what they total on a monthly basis. These could include:

• Mortgage or rent payments
• Car payments and transportation costs, like gas, tolls, and parking
• Food
• Utilities
• Healthcare
• Essential tech services, like an internet connection at home and a cell phone
• Childcare

From there, you can see what your emergency fund needs entail.

Let's say you add up your essential bills and see that they come to $3,500 a month. A three-month emergency fund puts you at $10,500. So in that case, even if you're not sitting on a savings balance of $16,776.18, you're in pretty decent shape if you have $10,500 or more in the bank. 

On the other hand, let's say you total your monthly expenses and realize it costs you $6,000 a month to cover your essential bills. Maybe you have an expensive mortgage and high childcare costs that are driving that number up. In that case, a $16,776.18 emergency fund actually doesn't cut it -- even though that's a lot of money to have in savings.

Make sure you're covered

You never know when you might need to access cash in a pinch. Even if you don't end up losing your job, you could run into issues with an expensive home or car repair that your regular paycheck can't come close to covering. You might also, unfortunately, end up needing medical treatment that leaves you owing thousands of dollars to your various healthcare providers.

Having a fully loaded emergency fund is the best way to secure the financial protection you need. But rather than fixate on what the typical American has socked away for emergency expenses, think about the amount of money you need to make sure you don't land in debt.