3 Signs Your Emergency Fund Actually Is Good Enough

There comes a point when it's okay to stop adding money to your savings.

Going without an emergency fund is one of the riskiest financial moves you can make. Without emergency cash reserves, you might instantly land in debt the moment an unplanned bill falls in your lap. Similarly, without emergency savings, you might get stuck in a dire financial situation if you lose your job and either don't qualify for unemployment benefits, or you find that those benefits replace just a tiny portion of the paycheck you're used to living on.

The unfortunate reality is that many Americans don't have an adequate emergency fund. In a recent report by the Federal Reserve, 36% of U.S. adults said they wouldn't be able to cover a $400 expense from savings. So clearly, those people need a more robust emergency fund, and soon.

But that doesn't mean your emergency fund needs to be padded. Here are a few signs that you're in perfectly fine shape right now.

1. You can cover a full year's worth of bills

Your emergency fund should be able to cover a minimum of three months of living expenses. And some financial experts will tell you that your best bet is to save enough to cover a year's worth of bills. If you're at that point with your savings, it's a sign you probably don't need to bank extra cash.

2. There's extra money left over for home and vehicle repairs

A big reason experts say to have a year's worth of living expenses in savings is to account for an extended period of joblessness. Now the reality is that if you have enough cash to pay for 12 months of bills, you're probably in pretty good shape to also cover unplanned home or car repairs. But if you have extra money in emergency savings on top of your 12 months of living costs, then you're in really solid shape.

3. There's additional money to cover healthcare costs

Medical bills could be a burden even if you have decent health insurance. But if your emergency fund contains enough cash to not only pay for a year of bills and some home and car repairs, but also, medical bills, then you probably don't need to so much as stick another dollar in there.

Don't go overboard on emergency savings

You may be thinking, "What's the big deal if my emergency fund is complete and I pad it even more?" The issue with that is limiting the return you get on your money.

While banks are finally paying more generously these days, the interest rate you get in your savings account might pale in comparison to the return you're able to get on money you invest in stocks and other assets. That's why you should know when to call your emergency fund complete and put your money elsewhere. And if the above signs apply to you, it means you're in really good shape savings-wise -- and that it's probably time to branch out, open a brokerage account, and put your additional money to work.