For years, financial writers have parroted the conventional wisdom that people need an emergency fund equal to three to six months’ worth of living expenses in a safe, liquid account.

Like most such rules, that formula seems due for a closer look.

For one thing, bank savings and checking accounts, the first places most of us consider for our emergency cash, are paying such paltry rates that they might not seem worth the bother. The average savings account is yielding a mere 0.08 percent, according to the latest Bankrate survey, while the average interest-bearing checking account ekes out 0.05 percent.

Savings on a treadmill

Meanwhile, inflation is running about 1.6 percent, as measured by the Consumer Price Index. As a result, money in so-called “safe” accounts is not only gaining very little, but is also actually losing ground every year. And that hypothetical emergency we’re worried about could be years away — or never happen at all.

At the same time, people who lose their jobs tend to be out of work much longer than three months — 37.1 weeks on average, according to the Bureau of Labor Statistics. From that perspective, even six months, or 26 weeks, of living expenses seems far from adequate.

So what’s a person to do — just give up on the whole idea and hope for the best? Probably not.

Fortunately there are some relatively simple ways for you to protect yourself. Being adequately prepared for a financial emergency doesn’t require that you keep all your money in low-yielding savings vehicles. You’ll need some money there, of course. But beyond that, you’ll want to make sure you have other financial resources at your disposal.

You might think of it as your emergency fund plus your backup emergency resources. Here’s some advice on each.

Assess your situation

All of us need some easily accessible cash to cover unexpected, but not all that rare, expenses like a big car-repair bill or visit to the emergency room.

Just how much you’ll need to put aside depends on a number of personal factors, says Mari Adam, a Certified Financial Planner in Boca Raton, Fla. For example, if you’re part of a two-earner couple, you might not require as much as if you were on your own. If you’re adequately insured, as you should be anyway, you might not need as much as if you’re not.

It’s worth remembering, too, that if you lose your job, you’ll most likely be entitled to weekly unemployment insurance benefits. That’s rarely enough to live on, but it does provide some cash flow for 26 weeks in most states and longer in some others. Congress has not yet extended benefits for the long-term unemployed at this writing.

Adam also suggests taking a hard look at your current spending habits relative to your income. The more you live within or even under your means, the better equipped you are to face a financial emergency. “We’ve seen people with considerable assets and income run into trouble because their overhead is too high and they spend everything they make,” she says. “They might make $500,000, but they spend every cent.”

Your emergency fund

Greg McBride, chief financial analyst with, maintains that most of us should probably aim for that fabled six months’ worth of expenses — though he acknowledges that only about a quarter of all Americans have reached it, according to a recent survey by Bankrate. In fact, he suggests that after you’ve put that much away in safe, liquid accounts, your next step should be to save additional funds in other, only slightly riskier investments, such as dividend-paying stocks.

So where should you put your “safe” money? Nowhere terribly exotic.

“I look at emergency reserves as insurance, not (as) an investment,” says Rick Kahler, a Certified Financial Planner in Rapid City, S.D. “So to that end, the most I may do with the funds would be to go with an ultra-short fund, CD or short-term bond fund. Anything beyond that leaves the spectrum of insurance and becomes an investment.”

McBride also suggests looking at federally insured online savings accounts, which not only pay a bit better than conventional banks, but also tend to respond more quickly when interest rates rise. One caveat: It can take a day or two for an online account to transfer money to your checking account for spending, which could be a problem in a truly urgent emergency.

As to losing ground to inflation, McBride considers that a weak argument. He points out that safe investments almost always lag inflation, even in times when interest rates run higher.

Your backup resources

Your emergency fund may be your first line of defense, but in case you exhaust it, you’ll want to know what other assets you have to draw on.

Mutual funds and other investments. Any investments you have outside of your retirement accounts are also fair game in an emergency. The risk, of course, is that your personal emergency will inconveniently coincide with a market meltdown like we experienced in 2008, and you’ll be forced to sell at the worst possible moment.

Roth IRAs. Unlike traditional IRAs, a Roth allows you to withdraw your contributions whenever you wish. For that reason, Adam says, they’re her favorite way to save, “especially for young adults who are starting to save for retirement. You can always take your contributions out without tax or penalty if you have a true emergency. But if you don’t, the money stays in the account, grows and is forever tax-free.”

Home equity. A home equity line of credit, or HELOC, which you’d open but plan to use only in an emergency, is another handy option. Many financial planners say the time to get one is before you face a crisis because they can be harder to qualify for if you lose your job, for example. Closing costs tend to be modest or even waived, and interest rates are less than exorbitant (currently under 5 percent on average).

However, McBride cautions that HELOCs may not be a sure thing. In the recent financial crisis, he notes, some banks either froze or simply cut off some customers’ home equity lines, leaving them without the credit they thought they could depend on.

Your 401(k) plan. You might also be able to take a hardship distribution or loan from a 401(k) plan, though neither of those is a move to be made lightly. In the case of a hardship withdrawal, you’ll face taxes today and have less saved for retirement tomorrow. And if you take a loan and then leave your job, you may be required to pay it back in full, or incur tax penalties.

Last resorts

Finally, there are some financial resources you should do your best to avoid touching, unless you have absolutely nowhere else to turn. Those include your traditional IRAs and credit cards.

Any traditional IRA withdrawals you make before age 59 1/2 will generally be subject to income taxes plus a penalty of 10 percent on the amount withdrawn, though you can receive a penalty exemption in limited cases. Perhaps the biggest drawback is that you’ll no longer have that money for your retirement years, where future financial emergencies may await.

As for credit cards, they might be the worst of all possible ways to cover a financial emergency. With average rates exceeding 15 percent for many types of cards, they could quickly get you into an even bigger mess.