Is $5,000 Enough for Your Emergency Fund?

You may have heard that the goal for an emergency fund is $5,000.Is that right, though?

There are a lot of good things about the most popular goal for a healthy cushion of savings, but $5,000 can’t be right for everyone. Here’s how to look at that number and change it until it fits your needs.

Not money, but months.

Should you have at least $5,000 saved for emergencies? Not if you live in Bel-Air, Los Angeles, at 944 Airole Way. The L.A.  Times says that the owner of that address spends $50,000 a month on energy just to keep the 105,000-square-foot, $126 million mega-mansion cool in the summer.

People have different ideas about what $5,000 means. So, instead of thinking about what your emergency fund can buy, think about how long it can last your family.

“A good rule of thumb is to keep at least three to six months’ worth of living costs in an FDIC-insured savings account,” said’s Laura Adams, MBA, head of personal finance.

Adams used Finder’s own Consumer Confidence Index, which showed that more than 15% of people couldn’t live on their savings for more than a week. No matter how much $5,000 means to you, that’s a dangerous situation to be in, especially since the odds are so high that the economy will go into a downturn that kills jobs in the next few months.

Adams said, “Emergency savings are important for everyone, but they’re even more important during a recession.”

What can you get for $5,000? The Three Most Important Emergencies

If you follow the three-to-six-month rule, you should be able to go up to six months without income if you lose your job. But that’s just one type of emergency. A lot of people also save extra money in case one of the “big three” things happens: your house, your car, or you.

It will cost $5,000 to fix the most common problems with your house. HomeAdvisor says that $5,000 is enough to pay for many of the most common emergency home fixes, as long as you only have one problem at a time.

While a new roof can cost five figures, a roof repair costs just over $1,000 on average, which is usually enough to get you by for a while. It takes an average of $1,258 to replace a hot water heater and $3,342 to fix water damage. Most heating and cooling repairs cost less than $100.

Fixing things around the house can show nasty problems that quickly become too expensive to fix, but $5,000 will cover most problems.

$5,000 is more than enough for most car repairs.

This website compares insurance rates and says that the average cost of fixing a car is $500 or less. The most frequent repair for a check engine light is replacing a catalytic converter, which costs about $1,355. The average repair for a check engine light costs about $400. It costs less than $250 to replace a battery, less than $400 to fix a cracked window and up to $1,000 to fix a bumper.

For medical emergencies, build your fund around the maximums on your insurance policy.

Consumer Health Ratings’ most current data, which takes inflation into account, shows that the average out-of-pocket cost for a person with insurance at the emergency room is $1,210. That means $5,000 is a good safety net for the usual health emergency. However, even with insurance, medical costs can go through the roof very quickly.

For 2023, plans on the ACA Marketplace must limit the amount of money people have to pay out of pocket to $8,700 for individuals and $17,400 for families. Check your policy’s out-of-pocket maximum again, and make the necessary changes to your emergency fund.

Remember, every dollar you save is one you don’t invest.

Because interest rates are going up, savings yields are better now than they’ve been in years. However, stocks are still down by more than 10%. Taking into account the situation, you may want to put all of your money into your emergency fund while the going is still good.

The problem is that the average savings return is still only 0.3%, even though it’s up from 0.06% in May 2022. That’s not really a huge haul. But index funds, which are sure to go up again, are still selling at a 15%–20% discount, as they have been for months. When you’re trying to save for emergencies, don’t focus so much on it that you forget about your long-term investments.

Adams said, “Instead, keep building your nest egg by maxing out a tax-advantaged retirement account like a 401(k) or IRA.” “That helps you get rich and lowers your taxes at the same time.”


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