Emergency funds: your financial seat belt
Before you invest a dollar, build a cushion. An emergency fund is the difference between a setback and a spiral.
Why it comes before investing
Without a cash buffer, any surprise (a medical bill, a car repair, a slow month at work) turns into a credit card balance. That balance grows at 20%+ interest while your investments grow at 7-10%. The math is brutal. The fix is boring: a stash of cash.
How much you need
Most people land somewhere between 3 and 6 months of essential expenses (rent, utilities, food, insurance, minimum debt payments). Variable income or single-income households should aim higher; a stable W-2 with a partner can sit at the lower end.
- Step 1: $1,000 mini-fund as fast as possible
- Step 2: 1 month of essentials
- Step 3: Full 3 to 6 months of essentials
Where to keep it
A high-yield savings account (HYSA) at an online bank. Not checking (too easy to spend), not investments (too volatile when you need it). Most major online banks pay 4-5% with FDIC insurance.
How big should your cushion be?
Plug in your monthly essentials and where you're starting from. We'll show you the milestones and how long each one takes.
Current cushion
$1,000
5% to a full 6-month fund
Still need
$20,000
≈67 months at this rate
- Starter ($1,000)$1,000 / $1,000
Reached
- One month of essentials$1,000 / $3,500
≈9 months at this rate
- Three months$1,000 / $10,500
≈2.6 years at this rate
- Six months$1,000 / $21,000
≈5.6 years at this rate
Lighter bar shows where you'd be in 12 months at the current rate.
Insight
At $300/month, you'll hit a full 6-month cushion in about 67 months. Try bumping it $50 to see what changes.