How much money should you have in your savings account? That question doesn’t have a one-size-fits-all answer. The right number depends on your lifestyle, your job stability, and your financial goals. What we’re talking about here is cash savings, not your 401(k), Roth IRA, or investment account.
This article will help you figure out how much to keep in your savings account, where to keep it, and how to decide when you’ve saved enough. We’ll also link to our free calculator so you can plug in your real numbers.
Use our Emergency Fund Calculator to find out how much savings you should have.
Article highlights
- Most people should aim for 3 to 6 months of expenses in cash savings.
- Keep this money in a high-yield savings account, not invested.
- Use our calculator to set a goal based on your real expenses.
What counts as savings?
Savings refers to money that’s easily accessible in case of an emergency. This isn’t your investment portfolio or retirement account. It’s liquid, it’s safe, and it should be easy to reach when life throws a curveball.
Where should savings be kept?
The best place to hold your savings is in a high-yield savings account (HYSA). These accounts earn better interest than traditional savings accounts while still allowing you to withdraw funds without penalties. Keeping your emergency fund here lets your money grow a little without taking on any risk.
Many well-known online banks offer HYSAs with competitive rates. Some popular options include:
- Ally
- Synchrony
- American Express
- SoFi
Rates vary, but at the time of writing, many HYSAs are offering around 4.00% to 4.35% APY. That’s not market-level growth, but it’s still a respectable return for money you need to keep safe and liquid. For example, if you have $20,000 in a HYSA earning 4.25% APY, you’d earn roughly $70 per month in interest, just for letting it sit there.
It’s not meant to build wealth. It’s meant to give you breathing room and keep your cash working a little while it waits to be needed. You’ll get a 1099 from your bank at the end of the year for any profits you’ve made, so be looking for it.
The 3-6-9 rule
Many financial experts recommend saving between 3 and 6 months of essential living expenses. This amount provides a cushion for job loss, medical emergencies, or unexpected repairs. But that’s not a cap, some people choose to keep 9 months or more on hand.
Why some people save more
If your income is unstable, or you’re self-employed, saving 9 to 12 months of expenses can give you more security. People without family support, or those in high-risk industries, often prefer to keep extra cash on hand. In some cases, individuals avoid investing entirely and keep all their assets in cash savings. While that may limit long-term growth, it reduces exposure to market risk.
Why 6 months is the sweet spot
For most people, six months of expenses strikes the right balance. It’s a strong cushion against most emergencies and gives you time to recover from job loss or a major setback. It also helps you avoid leaning on credit cards or loans when things go wrong.
What if six months feels out of reach?
Don’t get discouraged. If you’re starting from zero, even saving one month’s worth of expenses is a huge win. The key is to build gradually. Start by setting aside whatever you can, even if it’s $20 a week. Over time, you’ll be surprised how fast it adds up.
When you might want more saved
Everyone’s situation is different. While six months is a solid middle ground, you may want to go further depending on your circumstances.
Situations where more cash makes sense
If you’re a freelancer, contractor, or anyone whose income fluctuates month to month, consider saving closer to 9 or even 12 months of expenses. The same goes if you have serious health concerns, are supporting others financially, or live in a high-cost area without a financial safety net. More savings equals more peace of mind in unstable situations.
Figure out your true monthly expenses
To know how much to save, you first need to understand how much you actually spend. This means looking at your last few months of expenses and identifying what’s essential.
What counts as essential?
When you’re building your savings goal, it’s important to focus on the expenses you truly can’t afford to skip. These are your essential monthly costs, the things you’d still have to pay for even if you lost your job or faced a financial emergency.
Forget about luxuries or non-essentials for now. This is about the bare minimum required to keep your life stable if shit hits the fan. Once you identify these core expenses, you can multiply the total by the number of months you want to cover. That becomes your savings target.
Here’s what usually counts as essential:
- Housing (rent or mortgage)
- Groceries and household essentials
- Utilities (electric, water, gas, internet)
- Insurance (health, car, renters/homeowners)
- Transportation (car payments, gas, public transit)
- Minimum debt payments (loans, credit cards)
Once you’ve totaled up these monthly essentials, use that number to calculate your full savings goal, whether that’s three months, six, or more.
What to do once you hit your savings goal
Hitting your savings goal is a huge milestone, but it’s not the end. It means you’ve built a solid foundation. From here, your focus should shift to growth.
Where should extra money go?
After you’ve covered 3 to 6 months of expenses in savings, start putting additional money toward long-term growth. That could mean maxing out a Roth IRA, contributing to a 401(k), or investing through a taxable brokerage account. Cash protects you, but it doesn’t grow much. To build wealth, you need to move past saving and into investing.
The bottom line
There’s no universal number on how much you should have in savings at any given time, but six months of essential expenses is a smart target for most people. That money should live in a high-yield savings account, not in the market. If your situation calls for more, find ways to save more money. But once you hit your number, don’t stop, start investing.
Use our Emergency Fund Calculator to figure out your personal savings target based on real expenses and your comfort zone.