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When the economy feels this unpredictable, you want to hope for the best but brace for the worst. And that means being financially prepared for whatever happens. One of the best ways to prepare is to have an emergency savings — a buffer that can tide you over in case you lose your job or something else goes awry. The general rule of thumb is to have enough set aside to cover at least three to six months’ worth of living expenses. But how many of us actually have that much? Not that many, according to a recent survey from the Transamerica Center for Retirement Studies. Among the U.S. workforce, the median emergency savings is $5,000 — an “alarmingly low” amount in the view of the researchers. To be sure, $5,000 is nothing to scoff at, and whether it’s enough all depends on someone’s cost of living. But the average American spent $4,948 a month in the fourth quarter of 2024, according to the Bureau of Economic Analysis, suggesting many people fall well short of the recommended amount. Just 26% of surveyed workers have $15,000 or more, while 17% have nothing at all saved. Your capacity to weather a financial setback can become a higher priority as fears of an economic recession grow. But having a cash reserve can protect you from the financial strain of any unexpected event — an emergency room visit, surprise car repairs, or a broken furnace. Without it, you might have to rely on poor alternatives such as a high-interest loan or drawing on your retirement funds. Emergency savings are also critical for peace of mind. “Research shows that having cash to cover the unexpected has the biggest impact on financial stress, anxiety, and satisfaction,” said Brian Walsh, a Certified Financial Planner® and SoFi’s Head of Advice & Planning. So what? Building a healthy and readily-accessible emergency fund is one of the most effective steps you can take toward financial security. Beyond being good practice, it can become a lifeline. To guide you on the ideal amount, use a calculator like SoFi’s. And don’t worry if you haven’t started yet – it’s never too late.Related Reading
• What Is the Probability of a Recession? (J.P. Morgan Research)
• An Essential Guide to Building an Emergency Fund (Consumer Financial Protection Bureau)
• Should You Ever Invest Your Emergency Fund? (SoFi)
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