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build an emergency fund

One piece of advice every good financial advisor gives to customers is to build an emergency fund. An emergency fund allows you to weather any unforeseen emergencies, whether you lose your job, require an extended hospital stay or total your car. If you have the right-sized emergency fund, you can get through those emergencies without having to take out costly loans which will hurt your savings account in the future.

However not all places in the country are equally suited for building an emergency fund. Some places in America offer their residents more opportunities for higher incomes or come with lower costs of living. In order to investigate this issue, we look at data on costs of living and local incomes to find the best places to build an emergency fund. Check out our data and methodology below to see where we got our data and how we put it together.

Key Findings

  • Texas is a good state to save in – The top three counties where you can save for an emergency fund the fastest are in Texas. This counties offer a rare mix of affordable living with high-paying job opportunities. In particular, counties in the Dallas and Houston metro areas ranked well.
  • Suburban counties – Many of the counties in our top 10 lay just outside of big cities. For example, in our top five we have counties outside of Dallas, Houston, Detroit and Philadelphia. Residents in these counties have access to high-paying jobs in the big city as well as access to relatively affordable housing on the outskirts of the city.

emergency fund

1. Collin County, Texas

Collin County, Texas ranks first. This county is located in the Dallas metro area and is the seventh-most populous county in Texas. According to our data, the living wage in Collin is just over $23,000 for an individual. Fortunately for residents here, the economy is booming. The average individual in Collin County takes home roughly $45,100 per year.

Assuming the average resident put all their discretionary income toward their emergency fund, the average resident would need to save for just over one year in order to have an emergency fund worth six months of income.

2. Fort Bend County, Texas

Fort Bend County is located just southwest of Houston and encompasses some important suburbs and satellite cities like Sugar Land and Richmond. The cost of living in Fort Bend County is slightly higher than in Collin County and Fort Bend County also have slightly lower incomes on average, which drops Fort Bend County down the ranks.

We estimate that the average resident here could afford to save around $15,000 per year. If they dedicated all of that to an emergency fund, they would have a six-month emergency fund saved up in around 1.28 years.

3. Denton County, Texas

Collin County’s neighbor to the west, Denton County, takes the third spot. Our data shows the cost of living here is similar to that in Collin County, however Denton’s income numbers are slightly lower.

Overall the average individual earns $37,215 per year, of which we estimate $14,028 could be saved. Assuming all extra savings go to an emergency fund, the average Denton County resident could have six months’ worth of income saved in about 1.33 years.

4. Oakland County, Michigan

Oakland County is the first non-Texas county to rank in the top 10. This county is part of the Detroit metro area with its county seat in Pontiac. The average individual earns just under $36,100 while the annual cost of living for an individual is $22,781.

We estimate than that residents could dedicate nearly $13,300 per year to their emergency funds. We further find that it would take 1.36 years to save up six months’ worth of income.

5. Montgomery County, Pennsylvania

Pennsylvania’s third-most populated county takes the fifth spot in this analysis. This county is part of the Philadelphia-Camden-Wilmington, PA-NJ-DE-MD combined statistical area. This gives residents in the county access to good jobs in Philadelphia.

Our data shows the average person in Montgomery County earns roughly $39,100 per year and needs at least $25,300 to pay for the cost of living. Based on these two figures, we estimate it would take the average resident 1.42 years to afford a six-month emergency fund.

6. Wake County, North Carolina

Home to cities like Raleigh and Cary, Wake County is a great option for people looking to save some money. The jobs here pay well and the costs of living are manageable. The average resident earns $37,300 per year, according to Census Bureau data. Our data indicates a minimum annual cost of living of $24,300 per year.

If we combine the two, we see that the average person in Wake County could afford to save $13,000 per year in ideal circumstances. If the average resident saved $13,000 per year, they would have six months’ worth of income saved in 1.44 years.

7. Travis County, Texas

Travis County, Texas is our seventh-best place to build an emergency fund. This county has the fourth-highest cost of living in our top 10 at $24,700. On the other hand, the average resident earns $36,900.

Taken together, we estimate the average resident would need 1.51 years to save for a six-month emergency fund.

8. Hennepin County, Minnesota

The only Minnesota county to rank in the top 10 is Hennepin County. This county is part of the Minneapolis metro area and also contains the city’s western suburbs. The average individual earns over $36,800 per year. After accounting for the cost of living, we estimate the average resident could afford to save about $12,000 per year.

We further estimate they would need to save for 1.54 years to have a six-month emergency fund. That’s the eighth-shortest timeline in the study.

9. Fairfax County, Virginia

Residents in Fairfax County, Virginia who are interested in building an emergency fund are well placed to do so. Thanks in part to an individual median income of $50,800, we estimate it would take only 1.6 years for the average resident to save a six-month emergency fund.

10. (tie) King County, Washington

King County is dominated by Seattle and its suburbs. This makes it a high-cost-of-living area but also a high-earning area. According to our data, King County is both the second-priciest place to live and the third-highest earning area in our top 10.

We estimate the average resident would need to save for 1.66 years to save a six-month emergency fund.

10. (tie) Alleghany County, Pennsylvania

Pennsylvania’s second-most populous county ties with King County for the last spot. The average resident earns just under $31,000 a year, while the cost of living in the county is $21,500. We estimate that the average resident could afford to save about $9,200 per year, and would need to save $15,400 to have an adequate emergency fund.

Combining the two figures, we estimate it would take the average resident 1.66 years to save a six-month emergency fund.

build an emergency fund

Data and Methodology

In order to rank the best places to save up for an emergency fund, we looked at data for 90 of the largest counties in America. Specifically we looked at the following two metrics:

  • Cost of living. This is the annual income required for an individual to meet the minimum standard of living. Data comes from the MIT living wage project.
  • Median individual income. This is the median annual income for an individual. Data comes from the Census Bureau’s 2016 1-year American Community Survey.

To complete our rankings, we decided to estimate how long it would take for the average resident in every county to save six months’ worth of income. To do this, we first subtracted the annual cost of living from the median individual income. This gave us annual discretionary income. We assumed that all discretionary income would go toward the emergency fund. To come up with our final number, we divided the annual income by two to estimate six months’ worth of income and then divided that figure by annual discretionary income. The resulting figure shows the number of years it takes to save six months’ worth of income based on annual discretionary income. We ranked the counties from least amount of time to most amount of time.

Tips for Managing Your Savings

  •  It never hurts to get a second opinion on what to do with your money, especially when that opinion comes from a financial advisor. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
  • While many savings account give paltry interest rates, some give interest rates in excess of 1%. For example, Ally Bank and Synchrony both offer interest rates above 1.5% on their savings accounts. Keep in mind both of these banks are online-only so if you are looking for face-to-face customer service it may be best to go with a traditional retailer.
  • Certificates of deposit (CDs) are another way to earn relatively high yields on your savings. With a CD you give a bank your money for a certain period of time during which you cannot access it without facing a penalty. However once the CD term ends, you’re money will have earned interest. Capital One CDs earn at competitive rates.

Questions about our study? Contact 

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Derek Miller, CEPF® Derek Miller is a graduate of the University of Edinburgh where he studied economics. He is passionate about using data to help people make better financial decisions. Derek is a Certified Educator in Personal Finance® (CEPF®) and a member of the Society for Advancing Business Editing and Writing. He is a data journalist whose expertise is in finding the stories within the numbers. Derek's writing has been featured on Yahoo, AOL, and Huffington Post. He believes the biggest financial mistake people make is waiting too late to save for retirement and missing out on the wonders of compounding interest. Derek lives in Brooklyn.
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