If the year 2020 has taught us anything, it is that medical emergencies are unpredictable and can affect more than just your health; they can turn your life upside down. Take the COVID-19 pandemic, for instance, which brought almost the entire world to a halt. The combination of it being a highly infectious virus and one without a vaccine means that there is a very high risk of contracting it.
While some people could be immune to the virus, those whom it does affect could end up facing various costs for quarantine, hospitalisation, treatment, medicines, and aftercare amidst medical inflation. And if you don’t have the financial support to deal with such a medical emergency, it could derail your life’s savings. Having a medical emergency fund, could ease this blow. But how much should you put aside as a medical emergency fund? The answer to that is subjective and depends on various factors, which we shall consider below.
Income
A person’s income is the major factor in deciding the amount to be saved as an emergency fund. What is an appropriate amount for you, may not be so for someone else.
People in stable jobs are recommended to put away 3-6 months’ salary into their emergency fund, whereas people with lower job security are recommended to save 6-12 months’ salary.
A stable income ensures a consistent and bigger emergency fund. The number of earning members in the family also matters. If there are two people earning, it is easier to accumulate a bigger fund as compared to a single person’s efforts.
Insurance
Medical insurancealso goes a long way in fixing an emergency amount. It ensures cashless transactions in case of hospitalisation. However, for availing of facilities such as therapies, tests, medicines, doctor’s visits etc. one requires a minimal amount of savings. People with medical insurance must save about 3-4 months’ salary as they already have the insurance backup.
Debt
Though it is important to save for medical emergencies, paying off present debts should always be the priority. So, people with higher debt, EMIs, insurance premiums etc. have no alternative but to save the bare minimum for their emergency fund. Often even this may be difficult.
If you are in high debt and have a low-to-nil emergency fund, what do you do if a medical emergency crops up unexpectedly? Well, there’s no need to lose heart. A viable solution is to avail of a Personal Loan from a trusted bank.
For instance, HDFC Bank is one of the leading providers ofPersonal Loanin India. Existing customers can avail of a Personal Loan in less than 10 seconds, which is a relief for those facing a medical emergency. Other applicants can get a Personal Loan in about four hours.
Unmatched features such as flexible tenures, competitive interest rates, pocket-friendly repayments at Rs 2,162 per lac, and speedy disbursal make a Personal Loan from HDFC Bank a lifesaver in case of medical emergencies.
Now, lack of funds need not come in the way of the best medical treatment!
Faced with a medical emergency? Readmoreon how to be prepared for one!
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FAQs
How much should you save? While the size of your emergency fund will vary depending on your lifestyle, monthly costs, income, and dependents, the rule of thumb is to put away at least three to six months' worth of expenses.
Is $20000 enough for an emergency fund? ›
If your essential bills come to $6,667 a month or less, then you may be well-protected with $20,000 in the bank. But if you're a higher earner who spends $8,000 a month on essential expenses, then your minimum emergency fund target should really be $24,000.
Is $5000 enough for an emergency fund? ›
Saving $5,000 in an emergency fund can be enough for some people, but it is unlikely sufficient for a family. The amount you need in your emergency fund depends on your unique financial situation.
Is $10,000 enough for an emergency fund? ›
When asked how much money they'd need to save for a financial emergency to avoid additional stress, 40% would feel comfortable having a modest amount — below $2,500 — set aside. 21% say they'd need at least $10,000 saved to feel secure.
Is $30,000 a good emergency fund? ›
Most of us have seen the guideline: You should have three to six months of living expenses saved up in an emergency fund. For the average American household, that's $15,000 to $30,0001 stashed in an easily accessible account.
What is a good amount to put in emergency fund? ›
While the size of your emergency fund will vary depending on your lifestyle, monthly costs, income, and dependents, the rule of thumb is to put away at least three to six months' worth of expenses.
Is 100k enough emergency fund? ›
Comfort with emergency savings, by income level
More than half (56 percent) of households with an income of $100,000 per year or higher say they're comfortable: $100,000 per year or more: 56 percent. $75,000-$99,999: 48 percent. $50,000-$74,999: 45 percent.
How many Americans have $100,000 in savings? ›
About 26% of U.S. households had more than $100,000 in savings in retirement accounts as of 2022, according to USAFacts, a nonprofit organization that analyzes data from the Federal Reserve and other government agencies.
Is $2500 a good emergency fund? ›
To prepare for income shocks, many experts suggest keeping enough money in your emergency fund to cover 3 to 6 months' worth of living expenses. So if you spend $5,000 per month, your first emergency fund savings milestone should be $2,500 to cover spending shocks.
What is the 50 30 20 rule? ›
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.
Fewer than half of Americans, 44%, say they can afford to pay a $1,000 emergency expense from their savings, according to Bankrate's survey of more than 1,000 respondents conducted in December. That is up from 43% in 2023, yet level when compared to 2022.
How much does the average American have in an emergency fund? ›
The GBR study revealed that half don't have any emergency savings at all. Those who do are most likely to have $1,000 or less, which isn't nearly enough to get the typical household through a single month — or possibly even a single vehicle breakdown or home repair. Another 11% have between $1,000 and $3,000.
Why shouldn't you keep your emergency fund money in your checking account? ›
“By leaving funds in your normal checking account, they are more likely to be spent like normal savings and not be saved for emergencies,” said Nicole T.
Is 20k emergency fund too much? ›
A $20,000 emergency fund might cover close to three months of bills, but you might come up a little short. On the other hand, let's imagine your personal spending on essentials amounts to half of that amount each month, or $3,500. In that case, you're in excellent shape with a $20,000 emergency fund.
Is a 12 month emergency fund too much? ›
As a general rule, most workers can get away with a three- to six-month emergency fund. If you're retired, a 12-month emergency fund is more appropriate. Consider a 12-month emergency fund if you have a very unique job or are self-employed.
Is a 3 month emergency fund enough? ›
How much emergency fund should I have? Sudden car repairs, medical emergencies or job loss can all lead to unexpected debt if you're not prepared. It's difficult to predict how much these or other emergencies could cost — but three to six months' worth of expenses is a good goal.
How much should you eventually have in your emergency fund? ›
People in stable jobs are recommended to put away 3-6 months' salary into their emergency fund, whereas people with lower job security are recommended to save 6-12 months' salary. A stable income ensures a consistent and bigger emergency fund. The number of earning members in the family also matters.
How much emergency fund for a 30 year old? ›
PNC recommends that you consider keeping at least 3-6 months of your essential living expenses in an emergency fund to cover unexpected expenses, or loss or reduction of income. Talk with your banker to discuss ways to build and maintain your safety net.
Is 25k in savings good? ›
The median saver has closer to $5,000 in the bank. So if you have $25,000 saved, you're on the good side of the middle by a comfortable margin. That's a lot of cash to leverage — but also a lot to protect. Here's how to utilize, preserve and grow the impressive financial cushion you've built.
How much cash should I keep at home in case of an emergency? ›
It's a good idea to keep enough cash at home to cover two months' worth of basic necessities, some experts recommend. A locked, waterproof and fireproof safe can help protect your cash and other valuables from fire, flood or theft.
