Why Your Emergency Fund Should Be $35,000 in 2025.
If you don’t have $35,000 stashed away for a rainy day, you’re not alone—but according to a new analysis from Investopedia, that’s exactly how much the average U.S. household needs to stay afloat for six months.
That figure may seem high, but it's rooted in the real cost of living. Based on U.S. Census data, it represents roughly 40% of the average household’s annual income. It's also what many financial experts say is necessary to weather a crisis without plunging into debt.
Why You Need an Emergency Fund
Whether it’s a job loss, unexpected medical bills, or a major car repair, financial emergencies tend to show up uninvited—and expensive. That’s where an emergency fund comes in. Ideally, it should cover three to six months of essential expenses, including:
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Rent or mortgage payments
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Utilities
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Food and groceries
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Medical costs
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Transportation and car-related expenses
According to Investopedia, six months of these costs adds up to $35,217.73, up by nearly $2,000 from last year. That increase reflects rising healthcare costs and car-related expenses, which made up the bulk of the total.
A Breakdown of the Numbers
Here’s what six months of expenses looks like for an average U.S. household of at least two people:
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Medical care: $11,634
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Car ownership and operating costs: $10,621
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Housing and utilities: $9,785
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Groceries and food at home: Remainder of the $35,217 total
Medical care topped the list due to high insurance premiums, especially when factoring in COBRA costs during periods of unemployment. Transportation was also costly, reflecting both fixed car payments and variable operating expenses.
Most Americans Are Not Ready
Despite the recommendations, the median balance across U.S. transaction accounts was just $8,742 in 2025, according to Federal Reserve data. That’s enough to cover only about six weeks of average expenses.
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"Given the recent increase in economic uncertainty and a realistic calculation of what our ‘needs’ actually cost on a monthly basis, $35,217 sounds like a lot, and is a lot of money for most households," says Investopedia Editor-in-Chief Caleb Silver. "But having that emergency cushion could help prevent you and your family from falling deep into debt due to unforeseen circumstances.”
And Americans know this. A Federal Reserve survey found that 43% of people said they would turn to savings first in a financial emergency—more than those who said they’d borrow money, delay bills, or increase work hours.
Where Should You Keep It?
“Your emergency fund needs to be liquid and accessible immediately, but you should try to keep it in a higher interest earning type of account,” Silver advises.
That means options like high-yield savings accounts or money market accounts, which offer both access and interest growth—unlike traditional checking or low-interest savings accounts.
Methodology at a Glance
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Medical costs: Based on single-coverage premiums from the 2024 KFF Employer Health Benefits Survey, adjusted for household size and COBRA fees.
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Car costs: Includes fixed costs for two vehicles and operating costs for one, per the Bureau of Transportation Statistics.
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Housing and utilities: Median rent and ownership costs (American Community Survey, 2023) plus trash, internet, and other utilities (Consumer Expenditure Survey, 2023).
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Food: Annual expenditures on groceries, adjusted for inflation.
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All data adjusted to reflect March 2025 dollars.
Conclusion - It Pays to be Ready
In a world where economic shocks can come from anywhere—rising inflation, unstable markets, sudden job loss—being financially prepared is no longer just smart, it's essential. A $35,000 emergency fund might sound daunting, but it could be the difference between staying secure or spiraling into debt when life throws a curveball. While we all hope to avoid emergencies, hoping isn't a plan. In times like these, having real financial backup could be the most important investment you ever make.
