A recent CNBC and Momentive report reveals that fewer than 50% of Americans have an emergency fund and that 40% of those who do have less than $10,000 saved.[1]
Even more arlarming, according to data from the federal reserve, in 2021, one third of Americans could not cover a $400 emergency expense; and that number jumped to 67% in 2022.[2]
Assuming you have an emergency fund, is $10,000 in savings enough or should you save more? Although is financial experts have a clear and consistent recommendation, the answer depends on your personal circumstances.
According to financial experts, you should save at least three to six months' worth of living expenses in your emergency fund.[3] So, for example, if your monthly expenses (which include housing, food, utilities, health insurance, and transportation) are $2,000, then you should save between $6,000 and $12,000.
But if you are living paycheck-to-paycheck, then "any amount you can save is a good first step."[4] The important thing is to save consistently, even if it is a small amount.
"[F]or low-income savers (How Much Should You Save In Your Emergency Fund?)," "professor of finance at the University of Colorado Boulder, suggests a $2,467, or 1-month-income, emergency savings target. . . . Gallagher argues that those who have a minimum amount of $2,467 saved have a lower probability of financial hardship and are less likely to fall behind on paying rent, bills or medical care in the future."[5]
See Megan Mostyn-Brown, I'm a Financial Planner: Here's What I Recommend Clients Don't Use Their Emergency Funds On, GO Banking Rates, July 31, 2023 (Apple News link). ↩︎
Laren Bird, Suze Orman warns Americans are 'dangerously unprepared' as her company's survey reveals 67% of them can't cover a $400 emergency expense — here's how to make sure you can, MoneyWise, Aug. 11, 2023 ((Apple News link](https://apple.news/AN_HFUkdHQymrcjVV02xI-Q)). ↩︎
Kelly Ernst, How much money should I put in a high-yield savings account?, CBS News, March 16, 2023 (Apple News link) ("For an emergency fund, experts suggest saving at least three to six months' worth of living expenses. This includes essentials such as housing, utilities, food, health care and transportation. For example, if your average monthly expenses are $3,000, you'd want to save at least $9,000 to $18,000."); Alexandria White, Emergency funds can offset surprise medical bills, unemployment and more -- here's how to get started, CNBC, May 3, 2023 (Apple News link) ("While experts typically recommend you have an emergency fund with about three to six months worth of your living expenses, the amount you should save is dependent on your situation. In times of financial hardship, you may not be able to save that much money and then even $25 a week is a start."); Elizabeth Gravier, 3 to 6 months of savings might be 'tried and true wisdom' but this expert has advice if you're living paycheck-to-paycheck, CNBC, July 31, 2023 (Apple News link) ("[F]inancial experts generally suggest setting aside three to six months' worth of your living expenses in an emergency fund . . . ."); Joshua Rodriguez, How much is too much money for a high-yield savings account?, CBS News, Dec. 29, 2023 (Apple News link) ("Most experts suggest that you should keep between three and six months' worth of expenses in your emergency account at all times. So, if you have $4,000 per month in expenses, you should have between $12,000 and $24,000 in liquid savings at all times."). ↩︎
Elizabeth Gravier, 3 to 6 monts of savings might be 'tried and true wisdom' but this expert has advice if you're living paycheck-to-paycheck, CNBC, July 31, 2023 (Apple News link). ↩︎
Elizabeth Gravier, It's time for a midyear financial checkup, here are 3 things you should do now with your money, CNBC, Aug. 15, 2023 (Apple News link). ↩︎
Hani Sarji
New York lawyer who cares about people, is fascinated by technology, and is writing his first book, Estate of Confusion: New York.
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