3 Signs Your Emergency Fund Might Fail You

A recent SecureSave survey found that 67% of Americans do not have enough cash reserves to cover a $400 emergency expense. So if you have an emergency fund with $400 or more, you might assume you're in better shape than them.

But that doesn't mean your emergency fund will be able to truly come to the rescue the next time you land in a financial crisis. Here are a few signs that your emergency fund might seriously end up falling short.

1. It's a random amount

You may decide to save $2,000, $5,000, or $10,000 and call it a day. But landing on a random target for your emergency fund isn't going to do you much good. Instead, that number should be based on your specific expenses and circumstances.

If you own an older home, for example, $2,000 might fall incredibly short if you end up having to replace your roof or do a major appliance overhaul. Think about your specific needs when determining how much money to put into your savings account.

2. It's not enough to cover three full months of bills

You should aim to have enough money in your emergency fund to pay for three months of essential bills -- things like your rent or mortgage, car payments, utilities, and food. The logic is that if you were to lose your job, it might easily take a good three months to become gainfully employed again. And you'll need cash reserves to pay your bills while you're out of work -- even if you qualify for unemployment benefits (since they won't replace your missing paychecks in full).

Comb through your expenses to determine what your non-negotiable monthly spending amounts to. Then multiply that figure by three to come up with your minimum emergency savings goal.

3. You keep dipping in for non-emergency purposes

There's a reason your emergency fund is called what it is, and not your "dip in when you feel like it" fund. That money is supposed to be reserved for expenses that are unexpected and that you also can't put off -- for example, a car repair that's necessary to be able to drive your vehicle and get to work.

If you keep raiding your emergency fund to cover non-essential expenses, such as to buy concert tickets when your friends ask you to join them at the last minute, then there's a good chance you won't have enough money when a true emergency strikes. So instead, try your best to tell yourself that your emergency fund is off-limits unless the situation is dire.

Chances are, you worked hard to build your emergency fund -- no matter what sum it amounts to. So don't put yourself in a position where your savings won't cut it. Instead, make sure you can pay for three months of bills, and consider whether you need to save beyond that for things like home repairs. And if you do manage to boost your emergency fund, leave it alone until you really need it.