How Big Should Your Emergency Fund Be in 2025? Think Runway

What the pros actually do when surprises hit

Here’s the blunt truth I’ve learned across two decades of crisis calls and 3 a.m. spreadsheet tinkering: the people who handle chaos best don’t think in round numbers, they think in runways. Not “$10k sounds nice,” but “I’ve got 4-7 months of essential expenses covered, no stress.” Different mindset. Cleaner decisions. And it travels well in 2025 when rates and headlines still wobble a bit.

Quick scene-setter on the backdrop: inflation has cooled, but not vanished, CPI has been running around 2.6% year-over-year this summer (BLS, 2025). The Fed has eased a touch, yet cash still pays: 3‑month T‑bills are near ~4.6% as of September 2025 (U.S. Treasury), and top high‑yield savings accounts are roughly 4.5%-5.0% APY (Bankrate, Sep 2025). Meanwhile, the FDIC’s national average savings rate is still under 0.5% (FDIC, 2025). So yes, where you park cash matters. A lot.

Professionals set the tone with a simple structure that avoids heroics:

1. Think in runways, not income multiples. Count essential outflows, housing, food, insurance, childcare, minimum debt, then target months of coverage. If your essentials are $3,200, a 6‑month runway is $19,200. Income doesn’t pay bills when income vanishes. Runway does.
2. Use tiers, on purpose.
   • Tier 1 (Instant, 1-2 months): checking + high‑yield savings. Zero friction. FDIC/NCUA insured. Don’t chase an extra 0.2% here, speed beats yield.
   • Tier 2 (The rest of the runway): keep it liquid but better‑yielding. Examples: brokerage money market funds (SEC yield ~4.5%-5% lately), short T‑bill ladder (4-6 months), or a short‑term Treasury ETF with tight bid‑ask. No exotic stuff. No lockups.
3. Match the fund to your real risks. This is where pros spend time, becasue it’s the difference between “annoying” and “I can’t sleep.”
   • Income volatility: freelancers, founders, commission heavy? Aim 9-12 months of essentials.
   • Dependents: kids, parents, single‑income households? Add 1-3 months.
   • Healthcare: know your deductible + out‑of‑pocket max. If your family plan OOP max is $9k, that has to sit inside the plan somewhere.
   • Industry stability: tech sales in a slow Q4 vs. a tenured nurse are different animals. Adjust.
4. Keep it boring and automatic. Automation beats willpower. Pros set monthly transfers into Tier 1 until the target is met, then sweep overflow to Tier 2. Refill after any withdrawal, no debate club.

Simple rule I use with clients: build 1-2 months where you can tap the cash in under 60 seconds, then earn a decent yield on the rest without needing a manual.

One more practical note, because the “how-big-should-emergency-fund-be-2025” question keeps popping up: given rates near 4.5%-5% and inflation ~2.6%, your real return on well‑placed cash is slightly positive right now. That wasn’t true a few years ago. So the old anxiety about “cash drag” is less of a drag. Don’t over‑engineer; avoid I Bonds for emergency cash (12‑month lockup, 3‑month interest penalty if redeemed early), and skip callable CDs unless the rate is an outlier and you’re fine if life happens at month three, which it tends to.

All of this boils down to clarity beating cleverness. You’re not trying to win a yield trophy; you’re buying time and options. I’ve seen that save more careers, and marriages, frankly, than any fancy allocation ever did.

Find your number: 3, 6, 9, or 12 months?

Here’s the simple framework I use in real life with families and founders. It’s not perfect, nothing is, but it’s clear. And clarity beats clever nine times out of ten.

1. List the must‑pay items (monthly). This is the backbone. Skip the aspirational stuff. Include:
   • Rent/mortgage
   • Utilities (power, water, internet, phone)
   • Food (groceries + a little buffer, life happens)
   • Transportation (gas, transit, basic car upkeep)
   • Insurance premiums (health, auto, renters/home, term life)
   • Minimum debt payments (student loans, credit cards, car)

   Call this your Monthly Must‑Pay. If it’s $4,000, that’s your anchor.

2. Pick the months based on household risk. Start conservative, then adjust.
   • Start with 3 months if you have most of the following: stable W‑2 income, dual earners, no dependents, and low fixed costs. A lot of salaried, in‑demand roles fit here.
   • Aim for 6 months if: single‑income household, some variable/bonus pay, one dependent, and higher fixed costs (big rent, car payment, daycare).
   • Go 9-12 months if any apply: self‑employed/commission‑heavy income, multiple dependents, specialized job with longer re‑hire cycles, or you’re on a visa/work permit. I’ve seen visas add real timeline risk, great until it isn’t.
3. Size to your health plan. If you’re on a high‑deductible health plan, bake in at least one full deductible plus out‑of‑pocket max on top of the months you picked. Health expenses don’t wait for market rallies. If your plan’s OOP max is $8,000, add $8,000 to the fund target. Simple, not pretty.
4. Reality‑check with today’s cash math. As of September 2025, top‑tier online savings and T‑bills are around 4.5%-5.0% APY, while headline inflation is running roughly ~2.6% year‑over‑year. Your real return on emergency cash is slightly positive right now. That means holding an extra month or two isn’t the drag it used to be. Small detail, big behavioral win.

Quick example: Monthly Must‑Pay = $4,000. Dual‑income, no kids? 3 months = $12,000. Single‑income with one dependent? 6 months = $24,000. Self‑employed real‑estate agent with two kids and variable commissions? 9-12 months = $36,000-$48,000, plus your health plan OOP cap if you’re on HDHP. Yes, that can feel large. I get it. But I’ve watched one deductible event erase three months of progress.. and that really stings.

Two calibration checks I use with clients (and myself when I’m being honest):

• Job replacement time: If it would likely take 6 months to land a comparable role in your niche, don’t set 3 months. Be boring; choose 6-9. Boring survives.
• Correlation test: If your income falls when the economy slows (commissions, startups, cyclical industries), push toward 9-12 months. Income risk and market risk tend to show up together. And not politely.

Where to park it, briefly, because execution matters: keep 1-2 months where you can reach it in 60 seconds (high‑yield savings). Put the rest in a no‑fee HYSA or short T‑bills you can sell in a pinch. Avoid I Bonds for emergencies (12‑month lockup and a 3‑month interest penalty if you redeem before 5 years). Callable CDs? Only if the rate is a clear outlier and you’re fine if it gets called early. Life has a sense of humor about timing.

And yes, I’ve been the person who thought “my income’s stable, I’m fine with 3 months,” then watched a reorg clip my team and… well, you get it. Intellectual humility here goes a long way. If you’re unsure between 6 and 9, pick the higher number. You’re buying time and options. Time and options.

Tuning for 2025: inflation scars, rate reality, job risk

Calibrate your number to the economy we actually have now, not the one we had in 2019. Prices moved. A lot. The Bureau of Labor Statistics shows the CPI rose about 18% from January 2021 to December 2023, and added roughly another ~3% through mid‑2025. Call it ~20% since early 2021, give or take, depending on your basket. That means a pre‑2022 budget is like using last season’s playbook against a new defense, recognizable, but you’ll get stuffed on 3rd-and-2.

Use your last 3-6 months of actual spending as the baseline. Not your old spreadsheet. Your card statements are the truth.

I know this is annoying. It means pulling transactions, tagging the recurring stuff (rent, childcare, groceries, premiums), then adding a buffer for the irregulars, car repairs, sports fees, the random “my kid needs X by Friday.” If you’re variable income, push to the higher end. Gig/contract pay is still choppy this year; even with demand decent, assignments slip, start dates move. (I’m probably oversimplifying here, but the point stands.)

On the bright side, cash isn’t dead money anymore. Top‑tier high‑yield savings accounts are still around 4-5% APY in 2025, and 3‑month T‑bills sat near ~5% for much of the first half of the year (Treasury data). Compare that to the late 2010s when many online savings paid ~1% or less, FDIC’s published national savings rate averaged about 0.09% in 2019. Translation: your emergency fund keeps up a lot better today than it did back then. That doesn’t mean you underfund it; it just means you’re not giving up as much carry while you wait for the next curveball.

Now risk. If your industry had layoffs last year (2024) or earlier this year, pad your cushion by another 1-3 months. We’ve seen rolling cuts in tech-adjacent roles, media, some logistics and VC‑backed niches. Income risk and market risk still like to show up together, yeah, I said that already, and I mean it. If you’re on variable comp (commissions, bonus-heavy roles), bias higher. A dry quarter can coincide with an expense spike. I’ve had a “quiet” pipeline suddenly pivot to a 90‑day wait and, poof, there goes the tidy model.

Sanity checks to run this year:

• Re‑price your life: groceries, insurance, utilities, childcare. The CPI headline (~20% since early 2021) masks that some line items moved more.
• Re‑check after life changes: new baby, home purchase, switching jobs, or moving to variable pay. Also, COBRA premiums are real if you lose coverage; I haven’t even talked about that yet.
• Use a live baseline: average the last 3-6 months and then add 5-10% slippage for stuff you inevitably missed. I forget daycare incidentals every time, and I do this for a living.
• Rates may drift later this year: if short rates ease, you’ll still likely earn multiples of late‑2010s yields, but don’t pencil 5% forever. Refresh your math quarterly.

Bottom line, price your emergency fund for 2025 realities: higher living costs than 2021, still‑elevated cash yields, and choppier income for contractors. If you’re unsure between, say, 6 and 9 months, choose the bigger number. You’re buying time and options. Same advice I give clients, same advice I follow after learning the hard way.

Where to park the cash now (safety first, yield second)

You want this money boring, reachable, and not losing ground to inflation any faster than it has to. That’s the job. Here’s how I structure it for clients and, yea, my own household budget too.

Top layer (1-2 months): FDIC/NCUA high‑yield savings
This is your “rent is due tomorrow” cash. Keep 1-2 months in an FDIC or NCUA insured high‑yield savings account for instant access and zero price volatility. Coverage is $250,000 per depositor, per insured bank, per ownership category (same limit at credit unions via NCUA). If you’ve got more, spread across institutions or use different ownership categories. I know, it’s annoying paperwork, but it’s free insurance. Rates? They move, this year they’ve cooled a bit from 2023 peaks, but many online banks are still paying meaningfully more than big‑bank checking (which often rounds to basically 0%). Could that change later this year if the Fed trims again? Sure. That’s why this layer is for convenience first, yield second.

Middle layer: T‑bills or government money market funds
This is where you try to eke out a better yield without adding market risk. Two clean choices:

• U.S. Treasury bills (T‑bills): Maturities of ~4, 8, 13, 17, 26, and 52 weeks. You can build a simple ladder and roll it. Interest is taxable at the federal level but exempt from state and local taxes, which helps if you live in high‑tax states. Settlement is T+1, and if you need out early, you can sell, but I prefer letting them mature for full simplicity.
• Government money market funds: These aim to keep a $1 NAV and invest in short Treasuries/agency securities. You typically get same‑day or next‑day liquidity. Income is federally taxable; depending on the fund’s Treasury percentage, a slice may be state‑tax‑exempt, funds publish that percentage each year. Just remember, SIPC protects custody (up to $500,000 per account, including $250,000 cash) but does not insure against market losses or a fund breaking the buck. Different thing entirely.

Quick reality check: I’m not pretending to know where 1‑month rates will be in December. Nobody does. What I do know is these instruments give you principal stability and predictable access, which beats chasing a slightly higher quoted APY that you can’t actually get to when the car transmission dies.

Overflow option: I Bonds (for the not‑needed‑soon slice)
If you’ve built the top and middle layers and still have overflow you won’t need for at least a year, consider Series I Savings Bonds from TreasuryDirect. Key rules, no sugar‑coating:

• 12‑month lockup: you cannot redeem in the first year. Period.
• Redeeming in years 2-5 forfeits the last 3 months of interest.
• Purchase limits: $10,000 per person per calendar year electronically, plus up to $5,000 via federal tax refund as paper bonds. Treasury’s rules apply; can’t hack around them.
• Interest is federally taxable (deferred until redemption) and state‑tax‑free. There’s also an education tax exclusion in some cases, but the hoops are specific, talk to your tax pro if that’s the goal.

Mind the protection rules
– FDIC/NCUA covers bank/credit union deposits to $250k per depositor, per insured institution, per ownership category.
– SIPC is about brokerage custody up to $500k; it doesn’t make you whole on investment losses.
– Treasuries are backed by the U.S. government; that’s why I keep the “middle layer” anchored there, not in corporate credit.

Taxes matter (they always do)
– T‑bills and Treasuries: federal tax due, no state/local tax on the interest.
– Government money funds: federal taxable; some portion may be state‑exempt depending on Treasury weight (funds publish the percentage annually).
– Banks/Credit unions: interest is taxable at both federal and state levels.
If that felt a bit complex, yep, it is. But the frame is simple: top layer for immediacy, middle layer for yield without market risk, overflow in I Bonds if you truly won’t need it for a year. That’s how you keep an emergency fund safe and still earning something in 2025’s rate backdrop.

Build it without breaking your budget

Here’s the part where the rubber meets the paycheck. You’ve got rent or a mortgage, maybe student loans, maybe daycare that costs like a second mortgage, and you still want that emergency fund to actually exist. Totally doable. Not painless, but doable.

1) Automate a fixed transfer each payday, treat it like rent to your future self
Pick a number that’s boring and repeatable. $75, $150, $300, whatever fits. Schedule it for payday morning into your emergency account (top layer). No “I’ll move it later.” Later never shows. When clients ask how much, I say: if you wouldn’t “forget” rent, don’t forget this. For context, the Federal Reserve’s 2023 SHED report noted 37% of adults would struggle to cover a $400 unexpected expense. Automation nudges you into the 63% who can.

2) Split the difference with high‑interest debt
I’m not telling you to stockpile cash while paying 24% APR on a card. That’s lighting money on fire. The compromise that actually works: build a $1-2k starter fund first, attack toxic APRs next, then circle back and finish the fund. The Federal Reserve’s G.19 data shows average credit card APRs ran above 22% in 2024; even if they’ve wobbled this year, they’re still painfully high compared to FDIC‑insured savings yields. So you need a bit of cash to avoid swiping for every flat tire, then you go after the expensive debt with a bat.

3) Direct windfalls, at least 50% to the fund until you hit target
Work bonus, tax refund, equity vest, side‑gig burst, skim half. Right off the top. The IRS said the average 2024 refund was roughly around $3,000 (ballpark), which means even a “meh” refund could leapfrog you from zero to one month of expenses in one move. Yes, I know life wants the whole thing. But you’ll thank yourself the first time the HVAC dies in August.

4) Trim the fixeds first
Skipping groceries is not a plan. The savings come from the boring stuff: insurance, subscriptions, housing and transport. A few practical hits I keep seeing this year:

• Insurance shopping: Re‑quote auto/home every 12-18 months. In 2024-2025, many carriers pushed double‑digit hikes. I’ve seen families knock $40-$120/month off by switching or adjusting deductibles.
• Subscriptions: Audit annually. Downgrade tiers you don’t use; pause seasonal services. It’s common to find $20-$60/month in digital barnacles.
• Housing/transport hacks: Ask for loyalty renewals, negotiate at lease turn, or consider a roommate/parking trade. On cars: shop insurance+fuel+maintenance as one bundle cost; a cheaper note that drinks premium gas isn’t cheaper.

Those are the dollars that refill your fund without wrecking quality of life. Yes, I’m generalizing. Your city, your commute, your rates, all different. But the pattern holds.

5) Use guardrails until the next milestone
Pick a cap on non‑essential spending while you march from 1 month of expenses to 3 months, then from 3 to 6. Simple example:

• Until you hit 1 month: cap dining/entertainment at $X/week (set a number you can live with and pre‑load it to a separate debit).
• From 1 to 3 months: raise the cap slightly, but keep the automation and windfall rule running.
• From 3 to 6+: consider easing up another notch, if high‑interest debt is gone.

Is this overly mechanical? A bit, yeah. But structure beats vibes when the goal is months away, not days.

What about markets and rates right now?
Short answer: cash still earns something in 2025, and Treasuries remain attractive versus leaving money idle. High‑yield savings and government money funds continue to pay a material spread over big‑bank checking. I’m avoiding exact yield quotes here because they move, and frankly they can change between the time I hit send and you read this. But the stack we covered earlier, top layer for immediacy, middle layer for T‑bills/government funds, still makes sense in this backdrop.

Putting it all together

1. Automate $XX every payday into the emergency fund.
2. Build $1-2k fast, then prioritize any debt with APR north of your safe yield by a wide margin (read: most credit cards), then come back and push to 3 months.
3. Send 50%+ of windfalls to the fund until you’re on target.
4. Cut fixed costs before you micromanage groceries.
5. Use spending caps as temporary guardrails until you cross each milestone.

Small note from my own screwups: the month I “paused” automation was the month I spent the slack on nonsense. Keep the transfer. You adapt. Your future self can’t negotiate with a broken radiator.

Rules for using it, and refilling fast

What actually counts as an emergency? Good question. Short answer: stuff that threatens income, health, shelter, transportation, or family obligations. It’s not about whether it’s annoying. It’s about whether it’s necessary.

• Green‑light uses: job loss (income bridge), medical bills up to your deductible, necessary car or home repairs that keep you working and housed, and urgent family travel (illness, funeral).
• Red‑light uses: vacations, gifting, “stocks are down so I’ll buy more,” elective home or car upgrades. Those are planned expenses, so they belong in a different bucket.

How do you tap it without blowing up your long‑term plan? Withdraw in layers. I said “layers” earlier and then zipped by it, let me slow down.

1. First layer: regular savings/high‑yield savings. That’s your quick‑draw cash.
2. Second layer: short T‑bills or government money market funds. Sell the nearest maturity first. I almost said “ladder optimization,” but that’s jargon, just take the one that’s about to mature.
3. Avoid: selling long‑term investments (stocks, bond funds in retirement accounts) unless it’s truly catastrophic. You don’t want to lock in market moves you can ride out.

Why the fuss about not selling long‑term stuff? Because this year short T‑bill yields are still in the mid‑to‑high 4s, give or take, while equities can be down on the exact week you need cash. You’re paid to keep the emergency cushion boring. That’s the job.

Okay, you used it. Now what? Refill fast, on purpose, not “when I get around to it.”

• Temporarily raise contributions from your paycheck or automatic transfer until you’re back to target. Even +$100-$200 per pay period makes the gap shrink visibly.
• Redirect windfalls (tax refund, bonus, RSU vest, side‑gig bursts) at 50%+ to the fund until it’s whole again. Yes, that means fun money waits a bit.
• Pause discretionary upgrades for 1-2 months. You’ll forget the fancy speaker; you won’t forget the stress of a thin cushion.

Quick context check: a lot of households still struggle to cover surprise bills. Bankrate’s January 2024 survey showed only 44% could pay a $1,000 emergency from savings; 56% would need to borrow, cut back, or both. That’s not finger‑wagging, it’s a reminder that speed matters once you do spend from the fund.

Review quarterly in 2025, literally put it on the calendar for Q3 and Q4: Are expenses higher? New dependents? New deductible? Did rates shift? Short rates are moving with each Fed whisper this year, so if T‑bill yields drift and money funds tweak payouts, you may want to rebalance the layers. Also sanity‑check your target months: if your fixed costs jumped 8% this year, your 3‑month number should jump too.

Circling back: I know I said “avoid selling long‑term investments.” To be precise, avoid it for garden‑variety emergencies. If it’s a genuine disaster, use what you have and rebuild. Perfection isn’t the point, resilience is.

One last thing I learned the hard way: set a rule that any emergency withdrawal automatically triggers a higher transfer next payday. No decision fatigue. You used it; you refill it. That simple.

Skip it and here’s what usually happens

Real talk: life doesn’t wait for your spreadsheet to get pretty. The tire blows, the pet needs surgery, the deductible hits at the worst possible time. Without a cushion, most folks end up swiping a card at 20%+ APR or yanking from the 401(k). That’s compounding in reverse. The Federal Reserve’s G.19 data shows the average APR on accounts that actually carry a balance hit 22.8% in 2023, and it stayed north of 22% in 2024. At that rate, a $1,000 emergency becomes roughly $18-$20 of interest every month if you make just minimums, doesn’t sound awful until month 8 rolls around and you’ve paid a couple hundred dollars just for existing. Layer two or three “oops” moments together and you’ve got a debt snowball you didn’t sign up for.

And the 401(k) move, yeah, it feels smart because you’re “borrowing from yourself,” but be careful. Many plans price loans at prime + 1%, and prime is 8.5% as of Q3 2025, so you’re paying ~9.5% to replace what should be compounding for retirement. If you lose your job, the outstanding balance can get treated as a distribution. That means income taxes and, if you’re under 59½, a 10% early withdrawal penalty. Vanguard reported a record share of participants taking hardship withdrawals in 2023 (about 3.6%), which tells you how common this pressure has become. Also, markets don’t rebound on your billing cycle; the ER bill is due on the 15th whether the S&P is having a good week or not.

And stress, let’s just name it, goes through the roof when you’re juggling interest charges. Decision quality drops. I’ve seen it on trading desks and in kitchen-table budgets: when your working memory is jammed with “how do I float the rent,” you pick worse options. We all do. That’s not a character flaw, it’s math and cortisol.

Here’s the small, unsexy fix that works. Even a starter $1-2k cushion blocks most small crises from spiraling. The Consumer Financial Protection Bureau has shown that a few hundred dollars on hand materially reduces missed-bill rates; in practice, $1-2k covers the deductible on a lot of plans, a major car repair, or one rent check. It won’t solve a layoff, but it buys time, which is all you need to make cleaner decisions.

Set a simple 30‑day target and make it mechanical. Not perfect, mechanical. I’m literally thinking this out as a checklist you can run this week:

1. Open the account, high‑yield savings or a money market with no fees. With short rates still elevated in 2025, you should see something near 4.5-5% APY at reputable shops. If it’s 3% with hoops, wrong account.
2. Automate the first transfer, pick a number that you won’t notice until after two paychecks. $100-$250 per paycheck gets you to $1-2k in a hurry. If I’m being too jargony: automation = set and forget.
3. Cover one essential bill from the fund (yes, on purpose) in the next 30 days. Why? To prove the plumbing works and to build the refill reflex we talked about earlier, use it; raise the transfer next payday.

Quick clarification before I wrap this section: I’m not saying never borrow. I’m saying give Future You a cheap, fast option first. Because bills don’t wait for markets to rebound, and your stress meter doesn’t wait either. Future you will be obnoxiously grateful; present you just needs to start this week, even if it’s imperfect, even if it’s $50. Momentum beats elegance.

Circle back to the rule: any withdrawal automatically bumps your next transfer. That tiny piece of friction keeps small hits from becoming long debts. It’s boring, which is exactly why it works.

Frequently Asked Questions

Q: How do I figure out my emergency fund number without guessing?

A: Think in months of essential expenses, not salary. List the bills that must get paid: rent/mortgage, groceries, utilities, insurance, childcare, transportation, minimum debt, basic meds. Total that, say it’s $3,200/month. Then pick a runway based on your job stability: 3-4 months if you’re a dual‑income W‑2 household with stable roles; 6 months if you want a comfy buffer; 9-12 months if you’re a freelancer, commissioned, or in a lumpy industry. Example: $3,200 x 6 = $19,200. That’s the target. Review it every 6-12 months or after a life change (new baby, new lease, higher insurance).

Q: What’s the difference between Tier 1 and Tier 2 cash, and where should I park each right now?

A: Per the article’s setup, Tier 1 is your instant cash, 1-2 months, kept in checking and a high‑yield savings account. You want zero friction and FDIC/NCUA coverage; speed beats yield here. In 2025, good HYSAs are around 4.5%-5.0% APY, while the FDIC national average is still under 0.5%, so pick a top account, not your default bank. Tier 2 is the rest of the runway. Keep it liquid but earning: brokerage money market funds with recent SEC yields ~4.5%-5%, a 4-6 month T‑bill ladder (3‑month bills are ~4.6% as of Sep 2025), or a short‑term Treasury ETF with tight spreads. No lockups, no exotic stuff. I keep my own Tier 2 split between a Treasury MMF and a rolling T‑bill ladder, because becasue life likes curveballs.

Q: Is it better to chase the highest APY or keep the money super‑accessible?

A: For Tier 1, don’t over‑improve. The article’s point is right: don’t chase an extra 0.2% if it slows you down. Instant access wins. For Tier 2, you can be pickier: Treasury MMFs, short T‑bills, or a short Treasury ETF usually pay more than checking and are still liquid, often T+1. Practical rule: if accessing the cash would stress you out during an emergency, it’s the wrong vehicle. Also, watch fees and transfer times, some online banks take 1-3 days to move funds to brokerage, which is fine for Tier 2, not Tier 1.

Q: Should I worry about taxes on my emergency fund, or use T‑bills to cut the tax bite?

A: Worth thinking about. Bank interest (HYSA, CDs) is taxed as ordinary income at federal and state levels. Treasury bills are taxed federally but exempt from state and local tax, handy if you live in a high‑tax state. Treasury‑only money market funds often pass through a high percentage of state‑tax‑exempt income (check the fund’s annual tax breakdown), while “prime” MMFs generally don’t. Capital gains from rolling T‑bill ETFs can happen but are usually tiny if you keep durations short. Quick extras: FDIC/NCUA protects bank deposits; brokerage MMFs/T‑bills sit under SIPC and U.S. Treasury credit, respectively, different protections. And, yes, you can keep a small backup buffer in a Roth IRA (contributions only are withdrawable) but I treat that as a last‑ditch option because raiding retirement is a slippery slope.

@article{how-big-should-your-emergency-fund-be-in-2025-think-runway,
    title   = {How Big Should Your Emergency Fund Be in 2025? Think Runway},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/emergency-fund-size-2025/}
}