My Emergency Fund Is Larger Than What Most Experts Recommend. Here's Why

You never know when you might lose your job or get hit with an unplanned expense your regular paycheck can't cover. That's why it's so important to have money in savings to cover those unanticipated bills.

When it comes to building an emergency fund, many financial experts will tell you to aim for a minimum of three months' worth of bills. The logic there is that it might easily take you that long to find a new job after becoming unemployed, so you'll want enough cash to cover your expenses without having to resort to debt.

Financial guru Dave Ramsey said earlier this year that a three- to six-month emergency fund can be considered one that's fully funded. But some experts have upped their emergency fund recommendations in the wake of the pandemic. Suze Orman, a well-respected name in the personal finance world, says that a 12-month emergency fund is the ideal target to aim for.

I'm more in Orman's camp when it comes to maintaining my own emergency fund. But I actually have enough money in emergency savings to cover a little more than a year's worth of bills. Here's why.

It's matter of extra protection

Some people might feel that having 12 months' worth of living expenses in the bank is excessive. And I do think that for some people, a smaller emergency fund will suffice.

But my situation is a little different for a few reasons. First, I'm self-employed. This means that if I lose all of my clients and my income drops to $0 in a short period of time, I won't be eligible to collect unemployment benefits from my state.

Secondly, I have a lot of expenses to cover that I'm locked into, like a mortgage. When you rent a home and your financial situation worsens, you can seek to break your lease with minimal penalty (sometimes no penalty) or move when your lease is up. It's a bit harder to unload a house you own.

Also, I'm financially responsible not just for myself, but for my family. That includes my children and the giant dog we adopted a few years ago. I want to make sure I have enough cash in the bank to tide us over if I'm out of work for quite some time.

So why don't I just stop at a year's worth of expenses in savings? The reason is that for my own peace of mind, I want enough money to cover 12 months of bills plus some extra cash to pay for things like home repairs and medical bills.

When home repairs arise, I'll commonly dip into my emergency fund and then try to put that money back when I can. But having that extra padding helps me stay calm when I need to take a withdrawal.

Save the amount that helps you sleep at night

The money I have in my emergency fund is earning some interest, but I could potentially be earning a higher return by investing some of that cash. To me, though, it's worth it to forgo that higher return in exchange for more peace of mind.

If you're not sure how much money to keep in your emergency fund, I'd say save whatever it takes to help you sleep easy at night. That may be three months' worth of bills, six months' worth, a year's worth, or more.