Many individuals in the U.S. find it challenging to build an emergency savings fund. Starting out can be tough, and reaching the recommended savings of three to six months’ worth of household expenses feels daunting.

According to a recent report from Investopedia, a financial media organization, many people underestimate the amount of emergency savings they actually need.

The encouraging part: we now have a specific number to target. The discouraging part: it’s a hefty figure.

Investopedia suggests that a typical household in the U.S. should ideally have $33,000 saved up for emergencies, with the exact figure being $33,110.68.

This amount is approximately four times greater than what the average household currently holds in their combined savings and checking accounts, which sits at only $8,329 based on federal statistics.

Caleb Silver, the editor-in-chief of Investopedia, emphasized the importance of this revelation. “This should serve as a wakeup call,” he said, stressing the need for substantial savings to endure difficult times.

The $33,000 estimate is derived from evaluating the costs of six months of essential expenses for households with at least two members.

Healthcare costs are the most significant expense considered: the analysis presumes job loss, which often results in high medical bills during unemployment.

Understanding the $33,000 emergency fund: A breakdown

Here’s how the expenses total up:

• $10,754.63 for medical care: This figure is based on average COBRA premiums for six months of individual coverage, adjusted for the average household size.
• $10,250 for vehicle costs: This is the estimated cost of owning two cars for six months, including operating expenses for one vehicle.
• $9,137.17 for housing and utilities: This reflects the average costs of living and utility bills for both renters and homeowners over six months.
• $2,968.88 for groceries: This is the estimated average cost for food for six months.

Experts from Investopedia note that this calculation is conservative. For instance, it assumes that families will not dine out during this period of hardship and that only one vehicle will be used.

For some families, $33,000 may fall short

For certain families, especially following a job loss, $33,000 might not suffice.

Kelli Smith, a director of financial planning at Edelman Financial Engines, points out, “You need to recognize that it might take you six to twelve months to secure a new job.” She emphasizes the importance of understanding how much income is needed during periods of unemployment, particularly for single-income families, suggesting they may need more than $33,000.

Many Americans face difficulties when it comes to saving for unexpected situations. Investopedia notes that approximately 75% of households with bank accounts have less than $33,000 saved up for emergencies.

Financial advisors recommend saving enough to cover three to six months of living expenses to prepare for significant events like a major home repair, medical emergency, or job loss.

Smith adds, “Something unexpected will eventually happen, whether you need a new roof or face job loss, which could lead to taking on debt. It’s crucial to establish strong savings and spending habits. Building an emergency fund is a great first step towards that.”

It’s clear we aren’t saving enough

Most people seem to realize that they are not saving adequately.

An annual poll indicates that the Bankrate, a personal finance website, inquires whether individuals feel at ease with their emergency savings.

Interestingly, the unease regarding savings appears to increase each year. In 2018, just 37% of adults expressed discomfort with their emergency savings, but that figure climbed to 44% in 2020 and reached 59% in 2024.

“This heightened unease has paralleled the surge in inflation,” noted Greg McBride, Bankrate’s chief financial analyst. “People are starting to realize that their savings don’t stretch as far as they once did.”

According to Bankrate’s 2024 Annual Emergency Savings Report, 27% of adults reported having no savings set aside for emergencies.

Here’s a summary of how households are categorized based on their savings:

• No emergency savings: 27%
• Savings for 3-5 months’ expenses: 16%
• Savings for at least six months’ expenses: 28%

The survey revealed that baby boomers are the most likely to have emergency savings, while millennials are the least inclined.

If you belong to the 27% of Americans without any emergency savings, here are some professional tips on how to begin.

Consider a high-yield savings account

Currently, interest rates are on the rise, and high-yield savings accounts are offering some of the best yields seen in years.

Rates ranging from 4% to 5% have become commonplace for competitive high-yield savings accounts in recent years, largely due to the Fed’s aggressive interest rate increases aimed at controlling inflation.

“A high-yield savings account is an excellent option for your emergency savings,” advised Silver.

Consider a money market account

If you seek alternatives to high-yield savings accounts, a money market account might be suitable. Offered by banks and credit unions, these accounts benefit from federal insurance.

Although money market accounts are generally less flexible than savings accounts (you might find it harder to transfer money), they can still adequately serve as a place for your emergency savings.

After a period of low-interest rates, money market accounts are currently competitive, achieving rates around 4% to 5%.

Set up automatic deposits

A smart way to build your emergency savings is to set up automatic deductions from your paycheck, as suggested by McBride. This way, you may not even notice the missing funds.

“Successful saving relies on establishing a habit,” he explained. “Automating it is the best way to make that habit stick.”

Receive a windfall? Save it

With occasional deposits of $100, it could take years to accumulate $33,000 in savings.

Here’s a shortcut: Next time you receive a tax refund, holiday bonus, or any kind of unexpected income, consider putting the entire amount into your emergency savings.

“When you receive a raise, a bonus, or extra income from a side job,” McBride added, “seize the chance to set aside some additional money.”