How long does it take to save 3 months of expenses?

By Jessica Dosseh

The size of your emergency fund will vary depending on your income, lifestyle, and monthly costs. A good rule of thumb is to calculate how much you spend each month and use that as a baseline to build your emergency fund.

Get started with whatever works best for you; like $100 a week for five weeks, $200 a month for three months, or even $2 a day for a year, and put it into a High Yield Savings Account, then gradually increase your savings rate to hit three to six months worth of living expenses.

How long does it take to save three months of expenses?

General overview.

We often talk about the importance of saving for an emergency, and sometimes the process can seem daunting, but it doesn't have to be.

In the short term: try to set aside at least $500, but work your way up to half a year's worth of expenses.

In the long run: the right amount will depend on your financial circumstances, but a good rule of thumb is to have enough to cover three to six months' worth of living expenses.

While the size of your emergency fund will vary depending on your income, lifestyle, and monthly costs, a good rule of thumb is to calculate how much you spend each month and use that as a baseline to build your emergency fund. The idea is to put a small amount away each week or two to build up to that goal. You may also want to consider adjusting the total amount you need to save based on your bill obligations, job stability, and other factors.

Review the table below to get a general overview of how long it would take you to save a specific amount.

This table assumes you start at $0 and doesn't include any interest.

As you save, put each deposit into a High Yield Savings Account (HYSA).

Why you should have an emergency fund.

If you don't yet have an emergency fund in place, you're not alone. In the U.S., nearly 28% of adults do not have any money set aside in case of an emergency, according to Bankrate.

The reasons for needing an emergency fund will vary person-to-person; nevertheless, it's better not to be in a situation where you have to use debt or long-term assets, like retirement accounts, to get yourself out of a difficult position. While emergencies can't always be avoided, having a safety net can relieve some of the financial pain of dealing with these unexpected events.

Regardless of the circumstance, having access to liquid cash is always a smart idea.

How do I build an emergency fund?

Start small.

You can start by building an emergency fund of $500. Do whatever works best for you: $100 a week for five weeks, $200 a month for three months, or even $2 a day for a year. $500 can help you get prepared for the most common emergencies.

Calculate how much you need in an emergency fund.

Know your take-home pay after tax: multiply your total income by your tax rate, then subtract that number from your total salary. Here is an example – multiply $50,000 by 0.22 to represent a 22% tax rate, which is about how much the average U.S. taxpayer spends each year. That equals $11,000. Then subtract $11,000 from $50,000. That comes to $39,000. It's important to note that the tax rate you will end up paying is highly individual.

$39,000 in take-home pay is about $3250/month – ($9750 for three months, $19,500 for six months.) 

This means that if you make $50,000 a year, having about $10,000 to $20,000 in your emergency fund can be a good starting point.

Based on your savings rate, it could take an average of 50 months (4 years) or less to reach that goal. The main idea is to at least get started and increase your savings rate gradually.

Set a plan to reach your target amount.

One way to get started is to set up a per-paycheck automated contribution. Contact your bank provider to see if you can set up an automatic transaction process, or contact your employer and request part of your paycheck be deposited into a savings account. Once you set up your automated transaction process, all you need is to choose the amount you want to deposit per paycheck. It's that simple. The hard part is being patient as you wait for your money to grow.

It won't be easy, but if you can gradually increase your savings rate, the amount of emergency funds you can set aside will increase significantly. Bringing your savings rate from 5 or 10% to just 10 or 15% helps tremendously.

The bottom line.

Apart from covering basic living expenses, your emergency fund will also be able to minimize the need to tap into credit lines and prevent you from needing to liquidate retirement or investment accounts.

Most financial experts usually recommend that you have somewhere between three months and six months of basic living expenses in your emergency fund. Six months is recommended, especially for those with less stable employment or who don't have a consistent income.

Nevertheless, having at least $500 in your high-yield savings account is a good place to start, regardless of your circumstance.