Emergency savings are crucial in a recession. Here's the dollar figure to aim for.
Daniel de Visé, USA TODAY
5 min read
The average American family in 2025 should have at least $35,000 in emergency savings, according to a new report from Investopedia. And the figure keeps rising.
That tab represents six months of emergency expenses for the typical American household, and it totals about two-fifths of that household’s annual income.
Many financial experts recommend that families should amass enough emergency savings to sustain them for three to six months, if not longer. The emergency fund is meant to protect you against a job loss, health crisis, car breakdown or major household repair. Emergency savings become especially important during a recession, a scenario Americans could be facing in the months to come.
Last year, Investopedia set out to put a price on six months of emergency expenses, including housing, medical care, travel and food. In 2024, the total came to just over $33,000.
In a 2025 update, published in May, Investopedia ran the numbers again. This time, they added up to $35,218.
“It’s about a 5% jump,” said Caleb Silver, editor in chief of Investopedia. “The biggest factor is medical care. Those costs have gone up more than inflation.”
The analysis considered the costs of six months of housing, utilities, food, medical care and car payments for a household of at least two people.
Here’s the breakdown:
◾$11,635 for medical care: The average cost of single-coverage COBRA premiums for six months, multiplied by average household size.
◾$10,621 for cars: The average cost to own two vehicles for six months, and to operate one.
◾$9,785 for housing and utilities: Average costs for six months of housing and utilities for renters and homeowners.
◾$3,176 for food: Average costs for six months of groceries.
Most Americans don't have $35,000 lying around
Most American households don’t have that kind of cash lying around. The $35,000 figure is four times the median balance in the combined checking and savings accounts of American households, which is $8,742, according to the Federal Reserve.
At least 1 in 5 Americans have no emergency savings account, according to a March survey by WalletHub, the personal finance site. WalletHub CEO Odysseas Papadimitriou finds that statistic alarming.
“Emergency savings should be the top priority of every household, above everything else,” he said. Without it, “you are completely exposed to financial disaster.”
Silver, of Investopedia, agrees.
“If you don’t have an emergency savings account, and you come up against an emergency, and you have to go into debt to pay those bills, you start a cycle of debt that is very hard to get out of,” he said.
Investopedia tabulated six months of household expenses as an exercise, essentially, to illustrate that it is a very large sum.
“We’re doing it to make sure people have a realistic idea of how much your actual needs would cost if you were to lose your income and your healthcare to support your household,” Silver said.
And yet, as we have said, most American families do not have emergency savings to cover six months of expenses.
The Federal Reserve had its first rate cut in September with more to follow in the months ahead. What will rate cuts mean for savers? Deposit rates have started to come down a little bit, but some promotions continue to be good.
Any emergency savings is better than nothing
Here’s the good news: Even a small emergency savings account is better than nothing.
Emergency savings put consumers at ease. Research published in April by Vanguard found that having at least $2,000 in emergency savings yields a 21% boost in financial well-being, compared with having no emergency fund. People who lack emergency savings are more likely to report financial stress.
A $500 emergency fund might cover a small car repair or modest medical bill. A $2,000 fund can see you through a larger car repair or appliance replacement. With $10,000, you could cover a wider range of household emergencies.
“Three to six months of expenses may be a goal that feels a little unattainable for some,” said Sam Taube, a lead investing writer at NerdWallet.
As a more modest goal, Taube said, “there can be merit in just taking a round number, and aiming for that.”
Here are some tips on emergency savings, from NerdWallet, Investopedia and other sources:
FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken March 10, 2023.
Put your emergency fund in a high-yield account
In the current interest rate climate, it isn’t hard to find annual returns of 4% or better on your emergency savings account, if you know where to look.
One option is high-yield savings accounts. The best rates tend to come from online banks, which have relatively low overhead and are competing for your business.
Another choice: money market accounts. They combine features of checking and savings accounts. They can have high balance requirements, but competitive rates often top 4%.
Put emergency funds out of easy reach
It’s tempting to open an emergency savings account at your everyday bank. But that convenience “can be a double-edged sword,” Taube said, because the money is there for the taking.
A better idea, he said, is to “go through the steps of opening a separate account with a separate financial institution somewhere,” as a way to put your emergency savings out of sight, if not out of mind. That way, you’re less likely to raid the account.
Consider automated deposits
If you open an emergency fund and make contributions more or less at random, you may struggle to build savings.
Automatic contributions can help you amass savings methodically. An employer may allow you to direct-deposit part of your paycheck into an emergency savings account, or you can set up automated transfers yourself.
As Taube notes, a mere $10 a week adds up to more than $500 after a year.
