Building an Emergency Fund Beyond 6 Months 

by | Oct 26, 2023 | Savings

If you’ve read anything about having an emergency fund, you’ve likely read the advice to start with $1,000 for unexpected expenses, then build three to six months of your household expenses in savings in case of a loss of income. That is a solid start, but like clothing, most financial recommendations are not one-size-fits-all! Let’s dig a little deeper to see if that guidance makes the most sense for you. 

Some people have periods of unemployment lasting more than three to six months. The Bureau of Labor Statistics reports that as of August 2023, the median duration of unemployment was 8.7 weeks (just over two months) meaning half were unemployed for less time and half were unemployed for longer. But, the average duration of unemployment was 20.4 weeks, which is about five months – meaning some people find themselves out of work for a long time. That’s a big difference.  

If you’ve lost a job, your job hunt may take longer than you expect. Or, you may have a medical condition or caretaking responsibilities that require extended time away from work. If you’ve got a six-month emergency fund or are on your way to reaching that sum, you may be thinking about how to build up an even larger cash buffer.  

Luckily, there are lots of ways to build up your financial safety net! We’ll dig in to understand how much of an emergency fund you really need, and how you can build an emergency fund beyond six months.  

Why Do You Need a Dedicated Emergency Fund? 

First, why have an emergency fund at all?  Isn’t that kind of the point of saving money in the first place? Some people may consider their money to be in one big pool while others compartmentalize it.  

You may have savings beyond a few months’ worth of an emergency fund. But, with an emergency fund, it’s a chance to be intentional about setting money aside for this specific purpose, rather than other financial goals, such as retirement or things you’re hoping to purchase in the future. It’s ideal not to have to pull from your retirement because taking money out inhibits the growth of your nest egg. Setting up a dedicated place to allocate funds in case of an emergency or job loss can give that money a specific role in your financial security net. 

Image of a pool safety net to represent building an emergency fund. Green geometric glyphs on top and an icon of a hand holding out a safety shield.

Assess Your Current Financial Situation 

To begin building beyond a six-month emergency fund, evaluate your current financial situation so you can map out what it will take to reach your savings goals.  

Include anything that you would deem necessary to maintain your lifestyle with minimal disruption. For some people, they may want to calculate based on only what they need to survive. At a minimum, your emergency fund should cover life essentials like housing, groceries, and transportation. You might want to include optional expenditures, like keeping a gym membership active, even if it’s not strictly a necessity.  
Check out our Budgeting for Beginners or Intermediate Budgeting blogs to get a better idea of the sorts of monthly costs to factor in.  
Even if you feel you have a pretty good handle on your monthly expenses, due to the higher-than-normal rate of inflation the U.S. has been facing in 2022 and 2023, it’s a good idea to double check that the amount you’re setting aside accurately reflects inflation. You may want to project out for further increases, especially if you rent or have an adjustable rate mortgage, because increases in the cost of shelter drove a significant portion of recent inflation.  
After you add up your monthly expenses, you can use that as the basis from which you multiply to see if your current emergency fund aligns with your current monthly costs. Do you have six months’ worth of money saved? More, or less? 

Set Clear Savings Goals

Now, you’ll determine the ideal length for your extended emergency fund. For some families it might look like nine or 12 months; it all depends on your unique circumstances.   

If you have a two-income household, you may be able to meet some or all your expenses on a single income; factor in based on whether the higher or lower earning partner faces a period of unemployment. 

When it comes to health-related scenarios, consider your personal or family medical history to help guide and plan for potential health risks. If you must step away from work (or scale back to part-time) due to caretaking responsibilities, consider things like insurance benefits and who else could aid in caretaking.  

If you experience a job loss, be realistic with how long it could take to find a job that pays a sufficient salary to meet your needs, or how long to find one that would maintain your current lifestyle with non-essentials factored in. Some roles and industries have higher demand, while in others it may take longer to re-enter the workforce or find a job at the same pay level.  

There’s no right or wrong answer! Just consider what makes sense for you and your household. In general, the longer you think it would take to get back to normal after some life disruption, the more helpful it will be to have money stashed away. 

Building an Emergency Fund 

It’s time to get saving. Here are four key steps you can take to build your buffer and potentially save beyond a six-month emergency fund.

Reevaluate and adjust your budget 

Since you just reviewed your monthly expenses to determine your emergency fund dollar amount, this part should be easy! Now, you’ll go back and review your monthly budget to identify potential areas for cost-cutting. 

Cut back on anything that isn’t serving you or find ways to lower expenses without having to make big adjustments – maybe customer loyalty discounts on your car insurance or cell phone bill, for example. Then, allocate those additional funds you freed up toward your extended emergency fund savings goal.  

Consider additional income streams

The next best way to bolster your emergency fund is doubly efficient: add additional income streams. This additional money can go directly toward building your emergency fund. The bonus benefit is that if you lose your primary source of income, you still have some money coming in. This can reduce how much you need to pull from that emergency fund and make it stretch further.  

Check out our blog with tips on how to increase your income so you can save more for more details and specific ideas. But in general, freelance opportunities or investment opportunities that bring in additional income are two great places to start.

Use tax-efficient savings strategies

Another way to bolster your emergency fund is to explore tax-advantaged accounts, tax credits, and tax deductions to help reduce the amount you owe in taxes, then redirect that money to savings. It may be delaying gratification by waiting for a potentially larger refund check in the future, but sometimes it’s worth playing the long game. 

For example, you could increase your contribution to your 401(k) retirement account or leverage Health Savings Accounts as those are “pre-tax” or tax-deductible. You’ll be building savings (albeit not directly to your emergency fund) while reducing your tax burden. It’s important to understand the rules and potential penalties for withdrawing funds from these accounts, so research before you make any big money moves. 

If you’re self-employed – either for your primary income or a side hustle – research the relevant business deduction claims. If you own real estate, make sure you’re keeping good records and accounting for everything you can deduct – get real estate tax deduction tips from the IRS directly. 

Reach out to a financial advisor (ideally a fiduciary) or tax accountant who can recommend the best options for your situation. 

Use insurance to build your financial safety net 

Luckily, saving money in your emergency fund is not the only option you have to build your financial security net. Signing up for robust insurance policies can be well worth the cost of the premiums when you need the assistance most. 

First, look into health-related supplemental insurance options such as accidental injury insurance, critical illness insurance, short and long-term disability insurance, and long-term care insurance. Should an emergency occur that is covered by any of these policies, you will be financially covered thanks to the benefit payouts. 

Life insurance is another valuable tool in your financial security shed. Term life insurance can help provide financial security for surviving family members if the policyholder passes away. There are also other options such as whole life insurance with a cash benefit that can provide financial assistance during the policyholder’s lifetime. Be sure to speak with an insurance agent and understand the details of the policy. 


Building a larger financial safety net with a more substantial cash buffer can be especially helpful to get through a turbulent period in your life. Check in and evaluate your needs, your current emergency fund savings, your goals, and adjust if needed.  
Looking for a place to keep your emergency fund? Take advantage of Milli’s competitive Annual Percentage Yield on our Savings Accounts and Jars to earn interest on your liquid savings and let it grow. Sign up for Milli today! 

Keep reading on the Milli blog: 

All About Annual Percentage Yield and how Milli Pays Interest 
Financial Planning for Your Children and Family’s Future 
11 Best Personal Finance Books to Read and Succeed