Here you can find out how much emergency savings you actually need

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An emergency fund is an important part of your financial plan, especially during times of economic uncertainty. But the right amount of cash, according to financial experts, depends on your household and occupation.

According to a recent CNBC/Momentive poll of more than 4,000 US adults, most Americans are unprepared for a financial emergency. The results show that more than half of Americans don’t have an emergency fund, and 40% of those that do have less than $10,000.

While experts often recommend keeping enough cash to last three to six months, others take a more nuanced approach.

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“Rules of thumb overlook a number of important factors,” said certified financial planner Andy Baxley of the Planning Center in Chicago.

“The volatility of the industry you work in, the stability and predictability of your income streams, and whether or not you’re self-employed are just a few examples,” he said.

Consider your job security

Adequate contingency savings depends on how long it may take to replace your current income after a job loss, according to Niv Persaud, CFP and executive director at Transition Planning & Guidance in Atlanta.

Despite the threat of recession, the labor market remained strong The unemployment rate was 3.4% in April, the lowest since 1969. While sectors like tech, financials, healthcare and retail have been hit by layoffs in 2023, that doesn’t mean workers are scrambling for jobs.

According to a ZipRecruiter, about 55% of workers who were laid off in December or January found a new job by the end of January Opinion poll. On average, it took workers seven weeks to find a new job, with workers in advertising and marketing, automotive and engineering being the most likely to have already found a job.

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Still, “job-hunting takes longer for those with higher incomes,” said Persaud, who urges clients to hold nine months of emergency funds — including rent or mortgage, utilities, groceries and other necessary expenses — for dual-income households and a year of the year Expenditure for single-income families.

Kevin Brady, CFP and vice president at Wealthspire Advisors in New York, also considers his clients’ job security and is targeting spending three months for a two-income household with job security, or spending six months for a one-income family with job security . However, a single-income household with “highly variable wages” could aim to have nine months of emergency savings, he said.

Add a buffer for highly correlated revenue

Dual earners can also consider the degree of correlation between the incomes of the two partners. “If you’re both in tech sales, you’re both more likely to lose your job at the same time than if, say, one of you were a professor,” Baxley said. When income is highly correlated, he usually recommends a larger emergency fund.

Of course, the right number can also depend on personal preference. “If a calculator says you should have $20,000 in emergency reserves, but you can’t sleep at night on anything under $40,000, then $40,000 is probably the right number.” Here you can find out how much emergency savings you actually need

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