Savings Example
Emergency Fund — How Much and Where to Keep It
Calculate the right emergency fund size and see how it grows in a high-yield savings account.
Scenario
$5,000 monthly expenses. Target: 6-month emergency fund in HYSA.
Inputs
Monthly Expenses$5,000
Target Months6 months
HYSA Rate5% APY
Results
Emergency Fund Target$30,000
Monthly savings to reach in 2yr~$1,175/month
Annual interest on $30k at 5%~$1,500/year
Explanation
A 6-month emergency fund for $5k/month expenses is $30k. Once funded, it earns $1,500/year in a 5% HYSA — essentially free money for holding cash you need anyway.
Key Takeaways
- Keep emergency fund in an HYSA, not a checking account.
- Don't invest emergency fund in stocks — you may need it when markets are down.
- 3 months is minimum; 6 months is ideal for variable income earners.