How Much Cash To Have Stashed in Case of a Family Emergency

One of the most important cornerstones of financial planning is also one of the most often overlooked. Many Americans are saving for retirement, thanks in part to the understanding that they’ll need money after they stop working and the automatic deduction features of plans like a 401(k). However, when it comes to stashing money away for emergencies, Americans are coming up short.

A CNBC report notes that 56% of Americans don’t have enough savings to cover a $1,000 emergency, and according to a recent GOBankingRates study, 41% of women don’t have any emergency savings at all. If you have a family, it’s even more imperative that you have a sizable emergency fund, if for no other reason than you have more people to provide for in the event of an emergency.

How much exactly should you have in a family emergency fund, though, and what expenses should it cover? And how can you create one? Here are some tips and suggestions to help you answer all of these questions.

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Standard Emergency Fund Recommendations

Most financial advisors suggest that you keep three to six months’ worth of savings in an emergency fund. If you’re a freelance worker or otherwise have an erratic income stream, those recommendations typically jump up to one full year’s worth of expenses.

Emergency Fund Size for Families

If you’re a family, you’ll clearly need to boost the size of your emergency fund. For example, if you have saved $20,000 for you and your spouse but also have three kids, you might think of boosting that fund to $50,000. 

For some families, it’s easier to prepare for surprise family expenses by having two separate emergency funds. This way, you won’t dip into your “primary” emergency fund for family expenses. But others consider the family as a single unit, so they only choose to use a single emergency fund.

Either way, you’ll need to build up sufficient reserves to cover emergency expenses for everyone in your family. Thus, as your family grows, so too should your family emergency fund.

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Things for Which You Might Need To Use Your Emergency Fund

Although emergencies can’t be planned for, it’s highly likely that you’ll encounter some, or even many, throughout the course of your financial life. Seeing a list of the most common uses of an emergency fund may help you to realize just how frequent these events occur, and how planning for them can help keep you out of financial trouble.

‘Run-of-the-Mill’ Emergencies

“Run-of-the-mill” emergencies are expenses that are unexpected in their timing but that are foreseeable. For example, it’s highly likely that at some point you’ll have a surprise car repair or need to spend money on some type of home repair, such as a plumbing leak. An emergency fund should be in place to cover these bills and to prevent you from falling into debt.


Disasters are truly tragic emergencies that may not ever happen to you directly but that you need to be prepared for. Tornadoes, floods, earthquakes and other natural disasters can wreak havoc on your financial situation, even if you have insurance, so it’s imperative to have emergency funds to cover these events.

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Immediate Emergencies

Immediate emergencies are situations where you need cash right away to cover surprise costs. Generally, these expenses are smaller than true emergencies but still require cash to resolve.

For example, if you’re out on the road and you need food, lodging or even a car repair but your credit card is not working, you’ll need emergency cash. Some vendors or service providers might only accept cash, and if you’re not prepared with emergency funds you might be left stranded without food or lodging.

How To Generate a Family Emergency Fund

The primary way to create an emergency fund is to contribute some of your monthly paycheck to a savings account. This money should come off the top of your check first, before you use any leftover amount for bills or discretionary expenses. Most banks allow you to automate your savings by taking out a portion of your paycheck as it hits your account. This is a good way to build an emergency fund because you don’t have to remember to make your contributions and you’ll never actually access the money, making it less likely that you will spend it.

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Another way to build a family emergency fund is to get your entire family to participate in building it. For example, if you or your spouse receive a bonus, you can agree to automatically put it in your family emergency fund. If your kids earn money on their own, you can help teach them fiscal responsibility by asking them to contribute, say, 10% of their earnings to the family. 

With either method, you can build up an emergency fund fairly rapidly. For example, if you contribute just $500 per month to your emergency fund, you’ll have $30,000 saved up within five years. But even if you can only set aside $100 per month, you’ll still have $1,200 saved within a year, which is enough to cover most short-term emergencies like car repairs.

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About the Author

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.
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