Dave Ramsey Says This Is an 'Essential Part of Managing Your Money'

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  • Managing your money can be complicated, but Dave Ramsey has some advice to make it easier.
  • He believes having an emergency fund is an essential part of money management.
  • Even if you're paying off debt, it's a good idea to save a small emergency fund of $1,000 so you can handle expenses without going further into debt. 

Have you checked this essential task off your to-do list?

If you want to be successful in managing your money, Dave Ramsey said there's one thing you absolutely need to have. Ramsey is a trusted financial expert with a radio show and millions of followers and, while not all of his advice is spot-on, he's right about this must-have.

So, what is it that he believes is so important for people to do? 

Dave Ramsey says this is essential

If you want to improve your financial future and be effective at money management, here's what Ramsey says you'll need. 

"Having an emergency fund is an essential part of managing your money," he explained. "An emergency fund is cash you've set aside to cover unexpected expenses -- and only unexpected expenses! It's a financial buffer between you and life. It's the safety net that has your back when an emergency finds you."

Ramsey recommends you initially save a $1,000 emergency fund and then focus on paying off debt before saving more. Once you've repaid most of your consumer debt except your mortgage, he advises building an emergency fund that has enough in it to cover three to six months of living expenses. These are the expenses you would have to cover if your income dropped, and it may be less than three to six months of your current take-home pay. 

Ramsey believes saving this money is crucial because, "it's the first step in changing your whole financial outlook," since you'll no longer need to worry about going into debt to cover unexpected expenses once you have this money saved. 

Is Ramsey right?

Ramsey is absolutely right that an emergency fund is very important if you want to be successful financially.

Emergencies really can happen to anyone, at any time, and unless you have the money to cover them, you could be very vulnerable to a small financial disaster turning into a huge crisis. If you lose your job, for example, you can cope as long as you have the money to cover the bills until you find new employment. But if you have nothing saved for emergencies, you could be at risk of ruining your credit and having your car repossessed or your house foreclosed on -- all of which would be extremely difficult to recover from.

Ramsey's advice to save up a small emergency fund until you've paid debt is also a good tip. You don't want to spend months saving a ton of money while paying 17% interest on credit card debt, but you also don't want to start working on debt payoff only to end up having to charge on your credit cards again when your car breaks down. 

So, in this particular situation, listening to Ramsey is a smart move. An emergency fund is an essential part of smart money management and if you don't have one already, you should open a high-yield savings account and start working on creating one. Once you have the funds to cover emergencies, you'll be a lot more financially secure and will have a lot more peace of mind. 

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