Question: How much savings is enough savings?
Advice from the Lab: Enough to cover six months of expenses. (After that, pay off debt or contribute to a retirement account.)
In addition to your $1,000 in savings for emergencies, we recommend a rule of thumb: Keep between three to six months’ worth of cash in a high-yield savings account (such as this Ally account).
To calculate the total amount you need, total up what it costs to cover the basics each month (rent, bills, food, etc.) and multiply by six. This money should be liquid and accessible enough that you can withdraw it in less than 24 hours, but still earning interest and stashed away in a place that isn’t tempting. This money is only meant to be used for big emergencies. Think losing your job, unexpected medical bills, or totaling your car. You want to have enough that if you lost your job, you’d be able to live off your savings (without going into debt), until you find a new job
Even if you know saving is right, don't rely on self-control to do it every month. Temptations will always make it hard. Try saving app like Qapital that make saving automatic and customizable. You can name your goals and set up different rules that will make saving easy
Note: If you have a spouse who works, six months may be too much. Couples who share finances can aim for three months of savings since, in most cases at least, one of you will still have income. If you are single, or the sole breadwinner, stick with six months of savings.