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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 (1).

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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 (2). 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% (3). 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 (1).

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.

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 (1).

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.

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. So, in the event of 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 lasted more than six months (4).

If you’re the sole breadwinner in your household, you might need to save up more than $20,000. On the other hand, if you live in a dual-income household, you might be able to slash the emergency fund by a couple of grand.

The right number ultimately comes down to your own spending habits. A family spending $6,000 a month has very different needs than someone whose monthly expenses are closer to $3,000.

The easiest way to find your target is to track where your money goes each month and calculate how much cash you'd need to cover the essentials if your income suddenly stopped. Once you know your cash outflows, you'll have a much clearer picture of how large your safety net should be.

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You can track your spending and create a budget — all in one place — with Monarch Money. Once you link your bank accounts and investment portfolios, you can see all your transactions in one list, helping you stay on top of your spending.

You can also create custom goals for your retirement, personalized categories, and track your progress at all times on the all-in-one money management platform.

Monarch also offers a seven-day free trial to see if it’s right for you. If you like the platform, you can then get 50% off for your first year with the code WISE50.

Then, once you know how much you need to save, you can start figuring out how long it’ll take to build out your fund.

Saving $20,000 or more for emergencies isn't something that happens overnight. That's why it's important to make sure the money you're saving is working as hard as possible while remaining available when you need it.

A high-yield savings account can be a lucrative option. These accounts generally offer significantly higher interest rates than traditional checking or savings accounts, helping your cash grow while remaining easily accessible. They can also take the sting out of inflation a little bit.

A high-yield account like a Wealthfront Cash Account can be a great place to grow your uninvested cash, offering both competitive interest rates and easy access to your money when you need it.

A Wealthfront Cash Account currently offers a base APY of 3.30% through program banks, and new clients can get an extra 0.75% boost during their first three months on up to $150,000 for a total variable APY of 4.05%.

That’s ten times the national deposit savings rate, according to the FDIC’s May report.

Additionally, Wealthfront is offering new clients who enable direct deposit ($1,000/mo minimum) to their Cash Account and open and fund a new investment account an additional 0.25% APY increase with no expiration date or balance limit, meaning your APY could be as high as 4.30%.

With no minimum balances or account fees, as well as 24/7 withdrawals and free domestic wire transfers, your funds remain accessible at all times. Plus, you get access to up to $8M FDIC Insurance eligibility through program banks.

For many Americans, building a robust emergency fund and investing for retirement can feel like competing priorities. Every dollar directed toward cash savings is a dollar that isn't going into the market, which can make it seem impossible to tackle both goals at once.

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 (5).

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 (5).

The good news is that long-term investing doesn't require a huge lump sum.

The important thing isn't how much you start with — it's developing the habit. Even modest contributions can benefit from compounding and snowball into meaningful wealth.

With Acorns, you can automatically invest spare change from your everyday purchases into a diversified portfolio of ETFs managed by experts at leading investment firms like Vanguard and BlackRock.

Signing up for Acorns takes just minutes: Link your cards and Acorns will round up each purchase to the nearest dollar, investing the difference — your spare change — into a diversified portfolio.

For instance, if you buy a donut for $3.25, Acorns will round up the purchase to $4 and invest the change in a smart investment portfolio. So a $3.25 purchase automatically becomes a 75-cent investment in your future.

With Acorns, you can invest in a dividend ETF with as little as $5 — and, if you sign up today, Acorns will add a $20 bonus to help you begin your investment journey.

Correction — June 9, 2026: A previous version of the story incorrectly stated that financial planner Chad Lange recommends a $19,000 emergency fund. The recommendation comes from MarketWatch.

— With files from Vawn Himmelsbach

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MarketWatch (1); Bureau of Labor Statistics (2), (4); Bureau of Economic Analysis (3); Bankrate (5)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.