According to the latest data from the Federal Reserve Board, about 63% of U.S. adults say they could cover a $400 emergency expense using cash or its equivalent. That means roughly one-third could not without borrowing money, using a credit card, or selling something.<\/p>\n
While that’s the headline stat, it’s far from telling the entire story.<\/p>\n
So what does the average person actually have?<\/p>\n
When it comes to comparing personal finances, averages are easily skewed by a small number of extremely wealthy people. That’s why median numbers tend to better reflect what a typical household looks like.<\/p>\n
The Federal Reserve’s broader household balance sheet data shows the median transaction account balance — that’s checking<\/a> and savings accounts<\/a> combined — is much lower than many assume. In recent Survey of Consumer Finances data, the median sits around the mid-$8,000 range.<\/p>\n The three-month test<\/p>\n The Federal Reserve also reports that only about half of adults say they have enough savings to cover three months of living expenses.<\/p>\n Three months isn’t a strict rule, but it’s generally long enough to cover:<\/p>\n A job transitionA medical eventA major home or car repairA combination of smaller hits in a short window<\/p>\n If your monthly expenses are $6,000, three months means $18,000 set aside.<\/p>\n That’s not a small amount of money, but it’s achievable for a lot of people.<\/p>\n Where you keep it matters<\/p>\n The national average savings account rate is around 0.40%. Many large traditional banks pay closer to 0.01%. Meanwhile, some high-yield savings accounts are still offering around 4.00% APY.<\/p>\n On $10,000:<\/p>\n At 0.40%, you earn about $40 per year.At 4.00%, you earn about $400.<\/p>\n That’s a $360 difference for doing nothing differently.<\/p>\n If you’re going to build a safety cushion, it should at least work while it sits there.<\/p>\n