Emergency fund advice is everywhere—but let’s be honest, most of it sounds like it was copy-pasted from a textbook. “Save three to six months of expenses,” they say. And sure, that’s a good ballpark. But what does that actually look like in your life? Is it three months of ramen and roommates, or three months of maintaining your actual lifestyle?
I used to feel stuck every time I tried to figure out how much I should have in savings. So, I built my own rule: The Rule of Three. It gave me a starting point, an actual number to work with, and most importantly—it helped me move from anxiety to action. This article walks you through exactly how I calculated mine, what to include, what to skip, and how you can customize your own version that feels just right (not stressful).
Top Takeaways
- Understand what your emergency fund needs to cover—don’t just copy someone else’s number.
- Use the Rule of Three to break down your essentials and reduce overwhelm.
- Know what expenses are truly non-negotiable in an emergency month.
- Reframe savings goals to be emotionally motivating, not intimidating.
- Automate contributions, even if they’re small—it’s consistency, not perfection, that builds progress.
What Is an Emergency Fund Really For?
Before you start crunching numbers, it’s worth asking yourself a basic but important question: what does “emergency” mean in your life?
It could be a layoff, a medical bill, or even needing to leave an unhealthy living situation fast. The common thread is that it’s something urgent, unexpected, and expensive enough to disrupt your budget. Knowing this helps you define what your fund is for—not just what it’s supposed to be.
Too often, people save toward vague ideas of “security” but don’t feel any safer once the money’s there. The clarity comes when you tie the goal to specific scenarios: “If I lost my job tomorrow, this fund buys me time to find another without panicking.”
Breaking Down the Rule of Three
Here’s how it works:
- Basic living expenses
- Health + insurance costs
- Job-hunting or transition needs
Let’s break each one down.
Basic Living Expenses
This is your monthly survival number: housing, food, transportation, and utilities. The idea is to keep your life functioning, not luxurious. You don’t need to factor in gym memberships or meal delivery here—just the costs that keep the lights on.
I pulled my last three months of expenses and averaged the must-haves. It was eye-opening. My “bare bones” number was actually lower than I feared, which made the whole goal feel more doable.
Health + Insurance Costs
In a true emergency, medical bills can spike, and coverage could lapse—especially if your health insurance is tied to your job. I added in what a COBRA or an ACA marketplace plan would cost for a few months, plus my usual out-of-pocket for prescriptions and co-pays.
Don’t skip this step—it’s one of the most overlooked categories, and it’s exactly where a lot of emergency funds fall short. Even setting aside a modest health buffer gave me peace of mind.
Job-Hunting or Transition Needs
If you lose a job, the last thing you want is to be completely broke while trying to update your wardrobe, pay for a resume service, or attend networking events. For me, this category included things like LinkedIn Premium, gas for interviews, and a couple hundred dollars in case I needed to relocate for a role.
It’s also where I accounted for any temporary income loss—not the full salary, but a cushion to help me float for a while without falling behind on bills. Think of it as buying yourself breathing room to make smart decisions, not desperate ones.
How to Calculate Your Emergency Fund Number
Let’s put this into a framework you can actually use. You don’t need spreadsheets or a financial advisor—just a few quiet minutes, your bank app, and some honesty.
Step 1: Identify Your “Bare Minimum” Monthly Spend
Add up your rent or mortgage, utilities, groceries, insurance premiums, debt payments, and essential transportation costs. Skip anything optional for now.
Step 2: Add a Monthly Health + Insurance Estimate
If you’re covered through work, research what COBRA or an individual plan might cost. Add a buffer for things like prescriptions or emergency visits.
Step 3: Include a Realistic Job-Hunt Cushion
This will vary, but I added $300/month for job search costs, plus one-time expenses like interview clothing. You may want to round this based on your field or location.
Step 4: Multiply That Total by Three
That’s your emergency fund goal using the Rule of Three. You can adjust it higher if you want to feel even more secure, but now you’ve got a grounded, customized number—not an arbitrary guess.
How I Started Saving
Here’s where I’ll admit something: my first attempt at building an emergency fund was…not great. I tried to set aside big chunks, got discouraged, and ended up dipping into it every few weeks. Eventually, I learned to treat it like a habit, not a heroic act.
I Set a Monthly Micro-Goal
Instead of trying to save $6,000 overnight, I focused on saving just $150/month. That was the amount I could auto-transfer without noticing too much. Over time, I increased it slightly as my budget allowed, but the key was consistency. Small progress is still progress.
I Used a High-Yield Savings Account
It sounds boring, but getting even a few extra dollars in interest each month helped me stay motivated. I named the account “Freedom Fund” to remind myself of its purpose. That little label made it harder to tap into it casually.
I Treated Bonuses or Refunds as Boosters
Tax refund? Partial work bonus? I split it 50/50—half to fun stuff, half to my emergency fund. It felt good to celebrate and take care of my future self.
What Counts as an Emergency (and What Doesn’t)
Let’s be honest—sometimes our spending just feels like an emergency when it’s actually frustration or fatigue. I had to teach myself to pause before using my savings.
Real Emergencies
- Unexpected job loss
- Sudden medical or dental expenses
- Emergency pet care
- Major car repair
- Relocation due to safety or job opportunity
Not-Quite Emergencies
- A last-minute weekend getaway
- A new phone upgrade after yours gets glitchy
- Being “over it” with your car and wanting a new one
- A shopping sale you really don’t want to miss
You’re allowed to spend your money however you want—but knowing the difference helps preserve your financial peace when it matters most.
What If You’re Starting From $0? (It’s OK)
First, don’t beat yourself up. Emergency funds don’t show up magically—they’re built, slowly and intentionally. Starting small isn’t failure—it’s strategy.
Pick a small, manageable number (like $300 or $500) as your first mini goal. Treat that milestone like a full win. Celebrate it. Then work toward your Rule of Three number once you’ve got momentum.
You might even start by only covering one “category” (like health costs) before tackling the others. Progress isn’t linear, but every dollar is a vote for your future stability.
Smart Ways to Protect Your Emergency Fund
Saving money is one thing. Keeping it untouched until you truly need it? That’s the real challenge.
Here’s what helped me:
- I used a separate bank account without a debit card attached.
- I turned off “low balance alerts” so I wasn’t tempted to top it off unnecessarily.
- I added a quick “reminder” note to myself in the transaction description field—something like, “Only for real emergencies—you’ve got this!” It sounds silly, but it worked.
The key is making your savings just a little inconvenient to access—not impossible, but not too easy, either.
Conclusion
The biggest gift of building an emergency fund isn’t the money—it’s the confidence. It’s knowing that no matter what life throws at you, you’ve got a plan. You can ride the waves without capsizing.
So, if you’ve been stuck in the “I’ll start when…” phase? This is your sign to stop stalling. Try the Rule of Three. Make it yours. And build not just a savings account, but a safety net with your name on it.
