I Have $50,000 in Savings. Is That Too Much?

A recent SecureSave survey found that 67% of Americans don't have enough money in the bank to cover an unplanned $400 expense. That's a pretty alarming statistic, because as a general rule, you should have enough money in an emergency fund to cover at least three full months of essential bills. And that's really the minimum.

Some financial experts will tell you that a six-month emergency fund is more ideal. And some professionals insist that it's best to have enough money in a savings account to cover a full year's worth of bills.

But while it's definitely a good thing to build up a solid emergency fund, you don't necessarily want to go overboard. If you keep too much money in the bank, you might stunt its growth, whereas if you invest your extra cash in a brokerage account, you might generate a much higher return than what a savings account pays you.

If you have a $50,000 savings account balance, you might assume that you're sitting on too much cash. But whether that's true or not should actually hinge on your personal financial situation.

What do your bills look like?

Some people might decide they want $10,000 in emergency savings because that's a nice, clean number. But actually, your emergency fund should really be based on what your specific bills look like. If you spend $5,000 a month on essential expenses, you're apt to need a larger emergency fund than someone who only spends $3,000 a month on essential bills.

So, getting back to the question at hand, if you have $50,000 in savings but also spend $5,000 a month on essentials like your mortgage payment, car payment and insurance, healthcare, utilities, and food, then that balance doesn't seem so excessive. In that case, you have 10 months' worth of living costs in the bank, which buys you a lot of protection in case the economy tanks and you end up out of work for an extended period of time.

However, let's say you only spend $3,000 a month on essential bills. A 12-month emergency fund totals $36,000 in that situation. And that means you'd potentially want to look at taking $14,000 out of your savings and investing that money instead.

How many months' worth of bills should your emergency fund cover?

While your specific bills should play a role in determining how much money to put in your emergency fund, you'll also need to figure out how many months' worth of bills you're looking to cover. At a minimum, that number should be three, and you probably don't need to go beyond 12. But that's a pretty sizable range.

To land on the right number, ask yourself whether you're the sole breadwinner in your household. If you have a spouse or partner who works and you have joint bills, you may be able to get away with saving enough to cover just three to six months of expenses, the logic being that you hopefully would not both lose your jobs at the exact same time.

You should also consider your specific line of work. Do you have skills that are broadly in demand, or is your role pretty niche? If it's the latter scenario, then you may want to err on the side of having enough cash to cover nine to 12 months of bills, since it might take you longer than the average person to find work again after losing a job.

Finally, are you self-employed or a salaried employee? If you work for another company and lose your job through no fault of your own, you'll generally be entitled to unemployment benefits. Because those will replace a portion of your missing paychecks for several months, you may decide that you're okay with a three- to six-month emergency fund.

But if you're self-employed, you're not eligible for unemployment benefits at all. So that would be another reason to lean toward the 12-month mark as far as your emergency fund is concerned.