{"id":146425,"date":"2025-09-16T03:08:12","date_gmt":"2025-09-16T03:08:12","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/146425\/"},"modified":"2025-09-16T03:08:12","modified_gmt":"2025-09-16T03:08:12","slug":"americans-emergency-funds-are-shrinking-why-its-a-problem","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/146425\/","title":{"rendered":"Americans’ emergency funds are shrinking\u2014why it’s a problem"},"content":{"rendered":"

Having an emergency fund set aside for unexpected expenses<\/a> has long been considered an essential financial goal, but many Americans are now saving less than before.<\/p>\n

In fact, 1 in 3 Americans say they don’t have an emergency fund. And the median amount Americans say they have saved for emergencies is $500<\/a>, according to a survey conducted by budgeting app Empower in June.<\/p>\n

That’s $100 less than a median amount of $600 reported in the same survey conducted a year ago by Empower<\/a>.<\/p>\n

“The study suggests financial precarity at a time when household finances may be stretched due to rising prices and inflation<\/a>,” Rebecca Rickert, head of communications at Empower, said in the study.<\/p>\n

Higher earners are reporting smaller emergency savings balances as well. Full-time employees who contribute to their retirement through an account like a 401(k) and have at least $5,000 in their accounts report holding a median of $20,000 in emergency savings \u2014 $5,000 less than the median balance reported a year ago, according to a survey conducted by BlackRock<\/a> published Monday.<\/p>\n

How much to put away for emergencies<\/p>\n

Generally, financial advisors recommend having three to six months’ worth of expenses stashed in a savings account for emergencies. That means if you’re spending $3,000 a month on rent, groceries and other living expenses, you should have anywhere from $9,000 to $18,000 saved for a rainy day.<\/p>\n

But if that amount feels daunting, start saving enough to cover just your essential costs for three months<\/a>, Alyson Basso, a certified financial planner with Hayden Wealth Management in Middleton, Massachusetts, told CNBC Make It in 2024.<\/p>\n

“When planning for an emergency fund, it’s essential to strike a balance between ambition and practicality,” Basso said. In a true emergency, many non-essential costs could likely be cut, so your actual necessary expenses would be lower than what you normally spend.<\/p>\n

Even having $2,000 saved can make you happier<\/p>\n

Even having at least $2,000 stashed away for an emergency<\/a> can lead to better financial well-being, according to a May study<\/a> by investment management company Vanguard.<\/p>\n

Among more than 12,000 Vanguard investors, those with at least $2,000 in emergency savings had financial well-being scores that were 21% higher than those without. That jump was the largest boost linked to financial factors measured by Vanguard.<\/p>\n

Individuals who had both $2,000 and three to six months’ worth of expenses saved in their emergency fund were associated with a 34% higher financial well-being score. Financial well-being was measured using the Consumer Financial Protection Bureau’s well-being questionnaire<\/a>.<\/p>\n

“People with emergency savings have a higher level of financial well-being, spend less time thinking about and dealing with their finances, and are less distracted at work,” Paulo Costa, senior behavioral economist at Vanguard and co-author of the study, said in a press release.<\/p>\n

Want to stand out, grow your network, and get more job opportunities?\u00a0Sign up for Smarter by CNBC Make It’s new online course,\u00a0How to Build a Standout Personal Brand: Online, In Person, and At Work<\/a>. Learn how to showcase your skills, build a stellar reputation, and create a digital presence that AI can’t replicate.<\/p>\n

Plus, sign up for CNBC Make It’s newsletter<\/a> to get tips and tricks for success at work, with money and in life, and request to join our exclusive community on LinkedIn<\/a> to connect with experts and peers.<\/p>\n

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