How much money should you have in your savings account?

Getting Started

In order to figure out how much money you're going to want in your emergency fund, you'll have to look at three things: your spending, your budget and your future needs. Most experts agree that a balanced emergency fund should represent three to six months' worth of household spending (some set this amount as high as eight months) [sources: Orman,].

Now isn't the time for underestimating your expenditures or overestimating your future income. You need to know what it would take to keep your household afloat for six months if the unthinkable happened, and that means being as honest -- and as liberal -- as possible with your estimates.

If you use online banking, you can simplify this task immensely: Just look at your average spending for the last year or more, and use that information to figure out a total. If you foresee any upcoming expenses, especially if they are long-term commitments like college, remember to include those possibilities. Think about what you'd do about your major appliances or your car if one of them broke down during this emergency time. If you own a home, think about any unexpected expenses that may arise.

If you're like many, this six-month total may exceed your current savings account balance -- possibly by a lot. If you're new to saving and creating wealth, chances are arriving at that total seems overwhelming. It's OK to start small and grow slowly. In fact, it's essential. But just remember your goal here: setting that money aside for when your family needs it most.

This is a great time to look at your spending and try to find ways that you can save. If you aren't saving that money, where is it going? Down the drain, to impulse buys, vending machine snacks and all the other things you don't really need. Those pennies will become dollars, and those dollars will give you the peace of knowing your needs will be taken care of under any circumstances.

Once your emergency fund is complete, you can start looking at other ways of making your money work for you. But it can be hard to stay on track with your savings when you've made sacrifices today for a rainy day that might never come. Setting long-term goals beyond your emergency fund is a good way to stay motivated, but it's not the only one. Read on for a few more ways to stay on the right path.