Difference Between Savings Account and Emergency Fund, According to Financial Activist Dasha Kennedy

Most Americans have different bank accounts to meet different needs, from basic checking accounts for everyday transactions to certificates of deposit for long-term savings. If you have multiple savings accounts, at least one should be dedicated to an emergency fund. In fact, blogger and financial influencer Dasha Kennedy says you shouldn’t think of a savings account and an emergency fund as the same thing.

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In a recent Instagram post, Kennedy called savings accounts and emergency funds “cousins, not twins.” The self-proclaimed “financial activist” also outlined some of the key differences between savings accounts and emergency funds:

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Savings account

In his article, Kennedy wrote that a savings account is “ideal for planned spending and meeting short- and medium-term financial goals.” She also called a savings account “perfect for putting money aside for specific future purchases or experiences.”

Example: If you’re planning to buy a new laptop next year, use money from your regular savings account.

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Emergency Fund

This fund is “strictly intended for unexpected and emergency expenses that you cannot cover with your regular income or other savings,” Kennedy wrote, adding that the fund should serve as a “financial safety net for emergencies.”

Example: If your car breaks down unexpectedly and requires immediate repairs, dip into your emergency fund to pay for it.

What expenses justify savings compared to an emergency?

Here are some other guidelines Kennedy shared as to which expenses should come from which account:

The amount of money you should keep in your emergency fund depends on different factors, most related to your location, household size, income, and monthly expenses. As a general rule, you should aim to save enough money to cover at least three to six months of expenses. A good place to build an emergency fund is a high-yield savings account that can help you grow your balance faster.

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