Here’s who might not need 6-9 months in their emergency fund, pros say

For most of you, the short answer is likely yes, pros say. An emergency fund is a cash reserve that serves as a fall-back plan in case of job loss, unexpected medical expenses, an injury requiring time off work, large expenses like replacing an air conditioner or an inconvenient car repair, and more. Pros say the best places to put your emergency fund is somewhere that’s easily accessible, but still pays you some money, like a high-yield savings account or a money market account.

“Your future self will be very happy that cash is there if and when you need it,” says Mamie Wheaton, financial planner with LearnLux. Adds Greg McBride, chief financial analyst at Bankrate: “The money in the savings account is yours. The bank is paying you for it.” Meanwhile, “with a line of credit, there is no guarantee it will be there when you need it and if it is, it isn’t your money so you have to borrow, pay interest and ultimately repay the money,” he adds.

And if we’ve learned anything from the past few years, it’s that real emergencies happen when you don’t see them coming. “That’s when really catastrophic choices get made that can take years to recover from like loans at predatory rates or spending money you simply don’t have,” says Brian Hamilton, CEO of financial company ONE. 

Who might NOT need an emergency fund in savings

All that said, pros say not all of you need all that money sitting in a savings account.  “If you have taxable investments you could draw down from or borrow against in the event of an emergency, you may not need such a large cash cushion,” says Lauren Anastasio, director of financial advice at Stash, the financial subscription platform. (Here’s the minimum you might need in your emergency fund if you’re struggling to save.)

And McBride notes that: “Dual-earner households with steady, predictable paychecks may be able to get by with a cushion of less than 6 months’ expenses, but the opportunity cost of having more emergency savings is much lower than the actual cost of not having enough.”

You also may have another form of money that could help you out, and that might mean keeping less in an emergency fund too: “If you have a fall back plan that would help take care of you and your family if one of these situations occurred, then you may not need to have cash stashed away,” says Wheaton. 

You may also be thinking: But couldn’t I tap into my home equity rather than dumping money into a lower paying savings account? That might not be your best option, pros say. “A HELOC is, at best, a supplement to your emergency savings, not a replacement for it. When a recession comes along, lenders often cut or freeze home equity lines, meaning that when you need it most, there’s no guarantee it’ll be there,” says McBride. And Bobbi Rebell, author of Launching Financial Grownups and personal finance expert at Tally, says HELOCs “can be a bandaid to stop the hemorrhage and start the healing” should you not have enough savings yet. But “HELOCs often have a variable interest rate which means you could get stuck paying a lot of extra money for the privilege of accessing this line of credit, so ideally you would have both to complement each other,” says Rebell.

But even if you have some sort of fall-back plan, pros say an emergency fund serves a variety of purposes and one of them is peace of mind. “Keep in mind however that if you fall on hard times, the idea of paying interest on your cash may feel more stressful than it sounds today. You may also face financial anxiety if you feel uncertainty about how long or if you’ll be able to pay the debt back,” says Anastasio.