Prepare Now: Why You Need Emergency Funds (and How Much to Save)

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Do have any money set aside in a savings account?  Do you know how much should you save in case of a major life emergency?  I asked team member Harlan to share his opinion!

Harlan:   Common wisdom says you should have 3 to 6 months’ worth of expenses in an emergency savings fund.  But many reputable sources, like Forbes, Vanguard, and Business Insider, say it just depends.

Prepare Now Why You Need Emergency Funds And How Much To Save
Have at Least 3 Months’ Worth of Expenses Saved at a Minimum. You Can Always Increase the Amount Later!

Personal finance is, of course, personal.  But I recommend having enough money to cover at least 3 months of expenses to prepare for unforeseen circumstances!

How Much Should You Save?


Link:   You Need a Budget

A huge majority of folks do NOT have any type of budget.  But I recommend using a site that tracks all your expenses, like  So you can see how much you really spend each month.  And have a better understanding of how much you need to save in your emergency fund!

If you use, click the “Trends” tab, then set a timeframe to see how much you spent in the last month, 3 months, or 6 months.  You can also set a custom duration if you had a big purchase you don’t want to include in your total.

Prepare Now Why You Need Emergency Funds And How Much To Save
Within, Click “Trends” and Choose a Duration to See How Much You Should Save

For example, in the past 6 months, I spent ~$58,986.  So if I wanted a 6-month emergency fund, that’s how much I’d need to save! is a powerful tool for revealing how much you spend, and in turn, how much you should save!  And it will also show you where you spend most of your money.  That’s helpful if you want to save more by lowering certain expenses.

You Need a Budget is another great site for showing you how much you spend in a month.

It doesn’t matter how you track your spending, so long as you do.  Three months is a great minimum target to shoot for.  And once you have 3 months’ worth saved, you can always increase your savings later!

Does Having Available Credit Count?

Most folks in the miles & points hobby typically have a few rewards credit cards.  And credit cards come with a payment grace period of 21+ days.  That’s defined as the time between your statement close date and payment due date.  If you time it right, you can give yourself an extra month to pay off your charges.

During your grace period, you won’t pay any interest.  But after your payment due date, you’ll start to accrue interest.  On a premium rewards card, the rate can be shocking.  They’re usually 20+%!

Prepare Now Why You Need Emergency Funds And How Much To Save
You Can Use Your Credit Card’s Grace Period as a Cushion. But I Wouldn’t Rely on It Unless There’s a Real Emergency and You Know You Can Pay Your Charges Off Quickly.

If you don’t have anything already saved, this can be a stopgap to give yourself some extra time to get a paycheck or 2 in your account.  So that’s helpful for things like an emergency car repair, broken heating system, or if you get sick and can’t work.

By making the most of your card’s grace period, you can give yourself a cushion to deal with an emergency.

That said, I do NOT recommend relying on this.  But it’s good to know it’s there in the case the unthinkable happens.

What About Your Points Stash?

We don’t talk a lot about cashing-out your flexible points, including AMEX Membership Rewards points, Chase Ultimate Rewards points, and Citi ThankYou points.  Because you’ll usually get better value by redeeming them for travel (that’s where the Big Travel with Small Money comes from!).

But the fact is you can redeem them for cash for 1 cent per point (or .06 cents per point in the case of AMEX Membership Rewards points).

Prepare Now Why You Need Emergency Funds And How Much To Save
Try to Save Your Bank Points for Travel. But Cash Back Is Cash No Matter How You Spend It, Including for Your Emergency Fund.

These are terrible ratios.  But what if you have a real, honest-to-goodness emergency?  Something that can NOT wait?  In that case, I’d recommend turning to a cash back card first, if you have one, like:

All of these cards earn cash back rewards you can use for any purchase, including emergencies.  And a card like the Ink Business Cash Credit Card has a sign-up bonus of  $300 (30,000 Ultimate Rewards points) after spending $3,000 on purchases within first 3 months of opening your account.

If you only intend to redeem your rewards for cash back, you could pile them up and save an emergency fund.  And replace them as you go.  This could be a great “Plan B,” especially if you save up enough to cover a month of expenses – or more!  Here are 5 great cash back rewards cards to consider.

Bottom Line

There are differing opinions on how much to save for an emergency fund.  But 3 months’ worth of expenses is an excellent starting point.

You can use an online program like or You Need a Budget to find out how much you really spend.  And how much you should save!

If you don’t have anything saved and have an emergency, you could take advantage of your card’s grace period.  But only if you can repay it!

Or, you can redeem cash rewards from cards like the Barclaycard Uber Visa Card or Ink Business Cash℠ Credit Card.  But I’d suggest trying to keep your bank points, like Citi ThankYou points, for travel.  Because that’s where you usually get the most value.

Million Mile Secrets features a team of points and miles experts who have traveled to over 80 countries and have used 60+ credit cards responsibly to accumulate loyalty points and travel the world on the cheap! The Million Mile Secrets team has been featured on The Points Guy, TIME, Yahoo Finance and many other leading points & miles media outlets.

Editorial Note: We're the Million Mile Secrets team. And we're proud of our content, opinions and analysis, and of our reader's comments. These haven’t been reviewed, approved or endorsed by any of the airlines, hotels, or credit card issuers which we often write about. And that’s just how we like it! :)

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