53% of Americans Are Resolving to Build Emergency Savings. Here's How to Figure Out How Much You Need

At this point, many people are actively working on their financial resolutions. And in a recent report by Edelman Financial Engines, 53% of respondents said that building an emergency fund was a top priority of theirs.

If you're lacking in the savings department, then you may be eager to focus on building an emergency fund in 2024. But just how much money do you need to save? Here are some guidelines to follow.

Aim for three months of expenses at a minimum

Your emergency fund should contain enough money to cover three months of bills. The reason for that 90-day threshold is that if you were to lose your job, it could take three months to find a new one. So you want to make sure you're protected during that time, since you may not have a paycheck coming in.

Of course, in some cases, you might lose a job only to find a new one within a month. But in many professional settings, it can take longer than that, which is why three months is usually considered the minimum for emergency savings.

Figure out which expenses you want to cover

At a minimum, your emergency fund should cover at least three months of essential monthly expenses -- things like groceries, medication, car payments, and your rent or mortgage payments. But it's up to you to decide whether you want your savings goal to include non-essential expenses as well.

Cable TV, for example, is not an essential expense. But would you want to go without cable for weeks or months in the event of being unemployed? Maybe not. When you're stressed about a job search, not having TV content to unwind can make a tough situation even worse.

Similarly, let's say you have kids who take dance lessons. Those aren't essential the same way food and medication are. But would you really want to have to pull your kids out of those classes during a period of joblessness?

It's important to think about the expenses you personally would not want to give up in the event of a lost paycheck. Add those to your essential bills to figure out how much monthly income you need to replace, and then multiply that total by three at a minimum.

Decide if you should save beyond the three-month mark

In many cases, three months is enough time to search for work, go on interviews, and accept a job offer. But that's not guaranteed. In some situations, it could be smart to aim for more than three months' worth of emergency savings.

Let's say you have a spouse and three kids, but you're the only one in your household who works. Things could get really tight quickly if you find yourself out of a job. During a situation like a recession, it might take more than three months to get hired. So in that scenario, you may decide that your ideal emergency fund target is six months' worth of bills.

Similarly, if you're a junior accountant or work at an IT help desk, you may find that you're able to get a new job in a reasonable amount of time in the event of a layoff. But if you're a senior accounting manager or your IT job involves leading a team of coders in a programming language most firms don't use, then it might take longer to find a suitable replacement job after yours goes away. That would be another good reason to aim for more than three months' worth of expenses in the bank.

Any emergency fund you're able to amass is far better than having no cash reserves at all. But follow these tips to land on a savings target that offers you the right amount of protection.