4 Things Your Emergency Fund Should Be Able to Cover

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  • It's important to have a fully-loaded emergency fund at all times.
  • That means having enough money to cover specific expenses, like big repairs and your health insurance deductible. 

Make sure you're all set in the savings department.

Having an emergency fund could spell the difference between covering unplanned bills and ending up with a major pile of debt on your hands. But just how much money should you aim to sock away in savings? That largely depends on your personal circumstances and comfort level. But generally speaking, here are four things your emergency fund should be able to cover. 

1. Three months of bills

Maybe your essential living expenses cost you $3,000 a month. Or maybe you have a higher mortgage and car payment, so your total bills come to $4,000 a month. Either way, your emergency fund should contain enough cash to cover a minimum of three full months of bills. 

The logic there is that you never know when you might lose your job or find yourself unable to work for a period of time. If you have enough money to tide yourself over for at least three months, that buys you a cushion of time to find a new job in the event of a layoff, or recovery from an injury that may be keeping you from going out and bringing home a paycheck.

2. A big home repair

It's difficult to estimate what home repairs will cost, as the amount you'll pay will hinge on what the issue is and how bad it is. But as a general rule, your emergency fund should be sufficient enough to cover a major home repair -- say, one that costs $10,000 to $15,000. That sum will, at least for many homeowners, be enough to cover things like a new roof, a new heating and cooling system, and a new fence or deck if a current one rots or gets destroyed and isn't covered by homeowners insurance.

3. A big car repair

Just as home repairs could spring up out of the blue, so too can car repairs pop up when you least expect them to -- especially if you drive an older vehicle. It's a good idea to make sure your emergency fund can cover a major repair -- say, something in the $5,000 to $10,000 range. After all, when your vehicle stops running, you can't afford to sit back, save up for many months, and address the issue down the line. 

4. Your health insurance deductible

Many people land in debt when medical bills arise. That's why, at the very least, your emergency fund should contain enough money to cover your health insurance deductible. That's the amount you're required to pay out of pocket before your insurer picks up the tab for the medical services you need.

So, say your health insurance plan has a $1,500 annual deductible. You'll want to make sure you have enough savings to take $1,500 out of the bank if a medical issue pops up.

Make sure you're covered

A complete emergency fund could give you the peace of mind you deserve and help you avoid debt when life doesn't go your way. It's a good idea to save enough money to cover all of the above expenses. But if you can't, at least start somewhere and do your best to work your way up in time. You never know when you might get hit with a layoff, injury, car repair, or issue with your home, so it's important to be prepared for all of those possibilities.

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