Jun 6, 2026
Maybe you already have an emergency fund, or maybe you’ve been starting to fund one. But do you have $20,000 sitting in a high-yield savings account, just in case of emergency?
It seems like a lot of money, but that’s how much a MarketWatch analysis says you need — at minimum — as a buffer against the rising cost of living.
Advertisement
A general rule of thumb is that an emergency fund should cover about three to six months of living expenses. The problem is, those expenses have risen over the past few years, thanks to sticky inflation, policy shifts, tariffs and war (to name a few).
Combine that with stagnating wages, and many Americans have found that their purchasing power has noticeably decreased.
In April, inflation jumped to 3.8% — almost a three-year high — in large part due to rising energy costs. At the same time, the personal savings rate fell to 2.6% in April, according to the Bureau of Economic Analysis. While disposable personal income dropped 0.5%, spending rose 0.5%. In other words, Americans are spending more and getting less in return.
That means, even if you do have an emergency fund, it might not be enough to keep up with more challenging economic times.
While every household is different, “$20,000 is probably a good place to start for most people,” Igor Aronov, founder of FAR Financial, told MarketWatch.
Why you need to top up your emergency fund
If you’re contributing to a workplace retirement plan and investing in stocks, bonds and alternative assets, putting $20K in a high-yield savings account may seem like a missed opportunity for higher returns. Plus, you’ll lose out on the benefit of compounding.
But financial experts still recommend putting money aside in an emergency fund.
Advertisement
That’s because it provides a financial safety net for unexpected expenses, such as a costly car repair or medical bill, or the loss of income (such as a job loss, a reduction in hours at work or the loss of freelance gigs).
“It’s very important to have cash that you can access, with no taxes, no penalties, nothing,” Kevin Arquette, a financial planner with WealthPoint Financial Planning, told MarketWatch.
So, rather than racking up debt by charging expenses to your credit card or taking out a loan — or paying fees for taking early withdrawals from your retirement savings — you can simply borrow from your own emergency fund. Then, when you get back on your feet again, you can top it up.
The amount you need to set aside will depend on factors such as your household income and expenses. But a MarketWatch analysis of data from the Bureau of Labor Statistics estimates the monthly cost of necessities (which includes housing, transportation, groceries, healthcare, insurance and child care) at around $5,000.
Advertisement
So, in the event of a loss of income, a $20,000 emergency fund might only last about four months.
You may need to save even more than that, especially if your job isn’t stable or you support dependents. In that case, financial planners told MarketWatch that an emergency fund should cover six months of basic expenses — especially since it’s taking longer to find a new job in the current economy.
On average, it takes more than 11 weeks to find a new job, according to data from the Bureau of Labor Statistics. And, for 26% of unemployed people, the job hunt has lasted more than six months.
A single person doesn’t have a second income to rely on, so they should have at least $19,000 in an emergency fund, Chad Lange, a financial planner with Donaldson Capital Management, told MarketWatch. Married couples with children might need closer to $35,000, since their household expenses are higher.
Must Read
- You can now build wealth like a landlord for as little as $100 — and no, you don't have to chase down rent or take 3 A.M tenant calls
- Goldman Sachs used to hoard prime real estate deals for the ultrarich. Two ex-analysts just opened the door for $250
- Robert Kiyosaki begs investors not to miss this ‘explosion’ — says this 1 asset will surge 400% in a year
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
How to build a bigger emergency fund
Whether you already have an emergency fund or you’re starting from scratch, saving $20K or more might seem like a daunting task, especially if you’re feeling the squeeze from rising costs and stagnating wages.
After all, less than half (47%) of Americans say they have sufficient liquidity to cover a $1,000 emergency expense, according to Bankrate’s Emergency Savings Report.
Advertisement
More than half (54%) say they’re saving less for emergency expenses because of inflation and rising prices, while 26% say it’s due to changing income or unemployment. At the same time, 68% of respondents say they’d be “very” or “somewhat” worried about covering their immediate living expenses after a loss of income.
Some financial experts recommend contributing to your 401(k) or workplace retirement account up to the full employer match (if you get one), until you build up your emergency fund. After that, you can increase the savings rate of your 401(k).
If you don’t have a workplace retirement account, or don’t have a steady income, you could set aside a percentage of your income to an emergency fund — and transfer it over automatically or as soon as you get the check in the mail. You could also give your emergency fund a boost with your tax refund or work bonus.
Ideally, keep your emergency fund at a different institution than your regular bank to reduce the temptation to dip into it. A high-yield savings account typically pays around 3.0% to 4.0% APY, but make sure you understand any minimum requirements or monthly fees. It’s also federally insured up to $250,000 per depositor.
If you don’t have to use that emergency fund in the near future — great. But you’ll have peace of mind knowing it’s there if you need it.
You May Also Like
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how
- Millionaires under 43 are reshaping investing — just 25% of their portfolios are in stocks. Here’s where their money is going
- Robert Kiyosaki issues grim warning for baby boomers. Many could be ‘wiped out’ and homeless ‘all over’ the country. How to protect yourself now
Vawn Himmelsbach is a veteran journalist who covers tech, business, finance and travel. Her work has been featured in publications such as The Globe and Mail, Toronto Star, National Post, CBC News, Yahoo Finance, MSN, CAA Magazine, Travelweek, Explore Magazine and Consumer Reports.
