What's the right emergency fund amount?

How much should you have saved? Figure out your target number.

Look at what you spend

Most experts believe you should have enough money in your emergency fund to cover at least 3 to 6 months' worth of living expenses.

Start by estimating your costs for critical expenses, such as:

• Housing.
• Food.
• Health care (including insurance).
• Utilities.
• Transportation.
• Personal expenses.
• Debt.

You don't need to include expenses for anything you'd cut from your budget in the event of a job loss or major catastrophe. For example:

• Entertainment.
• Dining out.
• Nonessential shopping.
• Vacations.
• Savings for a second home, college, or other goals.

Decide if you need to save more

Putting aside 3 to 6 months' worth of expenses is a good rule of thumb, but sometimes it's not enough.

If you're able, you might want to think about expanding your emergency savings.

Here are some scenarios where having more in your savings could benefit you:

• During a recession (when unemployment rates are higher and the length of unemployment is often longer).
• If you're in a high-risk industry where layoffs are common.
• If your income isn't steady.
• If you're retired (and most of your money is in more-volatile stock and bond investments).