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How much money should you have in your emergency fund if you’re in your 20's?

Your monthly expenses give an important clue about how much you should have in your emergency fund.

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Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We earn a commission from affiliate partners on many offers, but not all offers on Select are from affiliate partners.

If you're in your twenties and just beginning your financial journey, there are a few basics you might be working toward covering. An emergency fund is a very important foundational step when getting your finances in order.

Your emergency fund should be in an account that's separate from the rest of your savings. The money in that account should be used for surprise expenses — like if your car needs an unexpected repair, or if you lose your phone and need to replace it ASAP. Your emergency fund can also help you avoid going deeper into debt, helping cover these unexpected expenses in the first place.

Once you commit to putting money away for unexpected emergency expenses, you may be wondering: How much money is enough money for an emergency fund?

How much should those in their 20s have in their emergency fund?

For the most part, the amount of money you should have in your emergency fund will depend on your monthly expenses. Financial experts typically recommend saving up three to six months' worth of necessary expenses in order to have a healthy, fully-funded emergency account. So, there's no specific number that a person in their twenties needs to have in their emergency fund — it should be based on their necessary monthly expenses. In other words, a healthy emergency fund could look different for you versus your peers.

The average monthly salary for people ages 20 to 24 is $2,496, according to data gathered from Indeed. If we were to use the 50-30-20 rule as a reference for spending this income, we can assume that 50% of the monthly salary would go toward essentials like rent, food, transportation and other necessities and 20% would go toward saving or paying off debt — that means that one month of necessary expenses is equal to 70% of your monthly income. Seventy percent of $2,496 works out to be $1,747. So the average person in their early twenties may need about $5,241 for a three-month emergency fund and $10,482 for a six-month emergency fund.

However, you may be in your late twenties and have a higher salary or live in a more expensive city. Now let's say that your necessary expenses (rent or mortgage, food, utilities, Wi-Fi, transportation, medical costs, etc.) run you about $2,500 per month. A three-month emergency fund works out to be $7,500 and a six-month emergency fund adds up to $15,000.

To figure out how much you spend each month, you might want to go through your bank statements to find your monthly totals. Or, to reduce some of that hard work, you might use a budgeting app like Mint, which connects to all your financial accounts (checking account and credit cards included) and categorizes all your transactions. It'll give you a monthly summary of how much you've spent. This will pretty much expedite the process of figuring out how much to have in your emergency fund.

And even if you still live at home and don't have to pay for rent, Wi-Fi and/or food, you should still work on building your emergency fund. This will only help you feel more financially secure once you're ready to live on your own.

Working toward a goal of having $1,000 of emergency savings is a great starting point for anyone. Just be sure to create a plan for how you'll continue to grow your emergency fund beyond that.

Like maybe you set a goal to increase your emergency fund by 5% each year. Or, perhaps you set up automatic transfers of $20 (or more, or whatever amount you're comfortable with) straight into your emergency account each week or each month. This way, you're saving money on autopilot and don't even to think how much money you can add to your emergency fund.

It's important to note, though, that your emergency fund should pretty much be growing with you. In other words, the older you get, the more money you'll need to have in your emergency fund. This is because when you're in your 20's, you likely don't have too many expenses beyond rent, utilities, Wi-Fi, food, medications and monthly debt payments.

But as you get older and start taking on other obligations like insurance payments, a mortgage and maybe even care for an aging parent, your monthly expenses will grow. So it makes sense that you'll eventually need more money to cover three to six months' worth of necessary expenses.

This is why the sooner you start building your emergency fund, the easier it'll be to keep it growing. And you can actually get a little extra help if you save your money in a high-yield savings account. High-yield savings accounts — like the Ally Online Savings Account or the Marcus by Goldman Sachs Online Savings Account — pay you higher amounts of interest compared to traditional savings accounts (just for depositing your money into the account). This can help your balance grow a little faster even if you aren't actively making contributions.

Granted, the interest rates aren't enough to earn you hundreds of dollars a month but it definitely adds up to more than you'd receive with a traditional savings account.

Ally Bank Online Savings Account

Ally Bank is a Member FDIC.
  • Annual Percentage Yield (APY)

    0.50%

  • Minimum balance

    None

  • Monthly fee

    No monthly maintenance fee

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle *The 6/statement cycle withdrawal limit is waived during the coronavirus outbreak under Regulation D

  • Excessive transactions fee

    $10 per transaction

  • Overdraft fees

    $25

  • Offer checking account?

    Yes

  • Offer ATM card?

    Yes, if have an Ally checking account

Terms apply.

Bottom line

Emergency funds play a key role in your overall financial health. Tried-and-true advice tells us that a "safe" amount to have for a fully funded account should be three to six months' worth of expenses. This, of course, will depend on how much money you spend each month — so a fully funded emergency account will look a little different for everyone.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.