Is 3 months enough?

[ScrimpAndSave]

Do you really think that 3 months of savings for an emergency fund is enough? 6 months? A year?

[disneysteve]

No, 3 months is not enough. Most people who lose jobs today are out of work for longer than that. Suze Orman has been preaching an 8-month EF for as long as I can remember. I think a minimum of 6 months should be everyone's goal and ideally up to a year.

[creditcardfree]

If you have zero emergency savings 3 months is a great goal!

However, sometimes 3 months is enough. Our EF isn't likely to be needed for a layoff. My husband is in the military and it is VERY hard job to get fired from. Regardless, we are going to double our emergency fund in the next year, which will put us over 6 months in emergency funds.

[lovcom]

In today's economy, 9 months should be the minimum in most cases.

[red92s]

To put things in perspective: I lost my job on October 1st. I'm a young, mobile, engineer with a great track record and references. While I have had a couple leads, several phone interviews, and one unattractive offer . . .I finally have a final in-person interview for a position I really want this Thursday. The job starts December 1st, two months after my lay-off date.

Even in a strong economy, the job search process can take awhile, especially on the professional level. Multiple rounds of interviews, reference checks, drug screens, etc., can easily add up to about a month or more of time from first contact to extending an offer; and then you might not start for another couple weeks. You could very easily be looking at two months relying on savings once you find a job in your area, that you are qualified for, that you WANT, with a company that wants YOU!

[ceejay74]

Based on other discussions on this site, I think it depends on what you mean by 3 months' EF. If you've saved 3 months' worth of net or gross income, but could get by on much less, then you probably could stretch that money for 6 to 9 months.

Unemployment compensation and severance packages shouldn't be counted on, but if you're employed by a company vs. self-employed, you probably will get assistance of some kind, and that could help you stretch your EF savings even further.

[kork13]

I finally have a final in-person interview for a position I really want this Thursday. The job starts December 1st, two months after my lay-off date.

Ah, that's great to hear, Red! I hope it goes well for you!

As to the original question, the others are pretty much on-point. As CCF mentioned, some jobs (such as state/federal gov't and military jobs) are more secure that others might be. In such a case, you can probably get by on a smaller EF. But do you really want to just get by, or do you want to be secure?

From your previous posts, we know that you just signed (or are about to? I forget the timing...) a new contract with your school under your teacher's union. That is probably a safer situation than some other jobs, and you can probably be okay for now at 3 months if that's all you're able to do right now. However, I would still say that you want to work towards at least a full 6-month EF. Remember that job loss is not the only "threat" facing your emergency fund. For example, if you have an accident or serious illness and are unable to work, you'll need to be able to still cover your living and other expenses.

[disneysteve]

Remember that job loss is not the only "threat" facing your emergency fund.

Exactly what I was going to say. Cars need repairs or even replacement. Appliances break. People get sick. Pets get sick. Stuff happens. Saturday night, I laid out $300 for an emergency plumbing repair, for example. Not something I expected to happen.

[LivingAlmostLarge]

I think it depends. 3 months EF is gross salary or expenses? Plus one or two income household? Whose needing the EF? Questions to be asked.

[Inkstain82]

In some circumstances, I'd say yes, but not many.

I have incredibly low expenses and I live in an area where low-paying jobs are fairly plentiful. I'd be just fine with three months expenses (about $4,500).

[thekid]

I look to at "EF months" in terms of expenses, not income. It's there for you to survive x number of months if income sources are unavailable.

I would think that 3 months family expenses (including unexpected expenses, such expenses are inevitable over longer periods) is very low. I think 6 should be the minimum goal. I would personally be very uncomfortable at anything under one year.

[ceejay74]

I agree, too, with Inkstain that different people's situations can be assessed. While I would love to have 3-12 months of expenses in the EF, in actuality I have about a month and a half. I'm just too focused on debt repayment to put much more in right now (I do add about $600 to it most months, but that's not going to get me to the next level very quickly). However, my household is composed of three youngish (30s) able-bodied adults, so the potential that we'd all three be unable to find any kind of employment, or receive any kind of aid from anywhere, is highly unlikely. In our everyday life, we get by (when you don't factor in discretionary spending, savings and extra debt repay) on less than two of our salaries.

Still a risk I'd rather not be taking in an ideal world, but I feel like our extra money is being better used paying down debt right now.

[PrincessPerky]

What happens when the money runs out?

Not that I would want to, but if my husband is laid off and not finding work here, we would move to be around family, really don't want to, but would rather do that than spend another couple months not finding a job.

So how much of an ef, depends on what you would do if out of work. if single I would prolly travel for a bit while looking for work (apply online, and check yes on willing to relocate).

What sort of money saving measures that you now do not do, would you have time for if you lost your job? (obviously not going to work if it is a medical issue)

Also, would you be eligible for unemployment? Would you take it? Can you get part time work out of your field to supplement? would you take it?
Just how much of your lifestyle do you need if you were out of work?

If you weren't increasing your ef right now what would you be doing with it?

[Fizgig]

Whenever I reach an EF goal, I always find myself wanting more. First I wanted four months, then six, then eight, now I'm aiming for a year. Hopefully once I get there I'll be able to chill out and use my excess money more productively, by paying off my second mortgage (bought it with an 80-15-5) and funding a Roth IRA.

But no, I don't think that 3 months is enough. Maybe it's doom-and-gloom reporting, but everything I'm reading indicates that 6 months is a typical length of unemployment right now.

[am_vanquish]

I'm just too focused on debt repayment to put much more in right now

Still a risk I'd rather not be taking in an ideal world, but I feel like our extra money is being better used paying down debt right now.

I was helping a family member setup a financial plan recently and we had this exact same discussion. Although I don't entirely agree with the philosophy, I do see the value in the argument that paying down debt is an "implied" emergency fund. This goes back to the philosophy that credit cards exist for emergencies. Therefore, by reducing the balance on a credit card, one is simultaneously creating room to use credit for an emergency.

Again, I think this is an inadequate long-term plan. However, for those struggling with high-interest debt and all fees that come with it (over-limit, late-fees, etc.), there is definitely a good argument to be made for only creating a small emergency fund, then returning your focus to debt repayment. After you're in a comfortable zone with the debt, come back to the EF.