A customer uses an ATM at a Bank of America branch in Boston, Massachusetts. REUTERS\/Brian Snyder – RC1E7FDABA00<\/p>\n
NEW YORK, Dec 16 (Reuters) – Do you have an emergency fund to tide you over in the event of a financial shock such as a layoff?<\/p>\n
In my reporting about navigating the financial impact of losing your job<\/a>, every single money expert I interviewed said an emergency fund is an essential financial planning tool to tide you over when disaster strikes. Yet Empower research shows more than one in five Americans have no emergency savings at all, opens new tab<\/a>.And, according to a recent Bankrate survey,, opens new tab<\/a> just 46% of Americans have enough savings to cover three months of expenses. (Keep in mind that three months of expenses is the bare minimum money experts recommend stashing away for a rainy day. More on this below.)<\/p>\n “Before you save for anything else, get your emergency savings shored up, especially if you’re worried about losing your job,” says Kate Byrne, head of cash plus distribution at Vanguard Group.<\/p>\n How do you start building an emergency fund? Consider these five steps.<\/p>\n FIGURE OUT YOUR MONTHLY BUDGET<\/p>\n Start with a basic budget: make a list of your monthly expenses. What are the non-negotiable obligations, including rent or a mortgage, utilities, car payments and healthcare? Then pinpoint the places where you could potentially trim your monthly spending, if necessary, including food, dining out, travel and entertainment.<\/p>\n People order food at Margon Restaurant near Times Square in New York City, U.S., November 25, 2025. REUTERS\/Jeenah Moon<\/p>\n Knowing those numbers ahead of a layoff or any other major financial jolt will help you avoid overspending, prioritize emergency savings and then invest consistently, says Alexandra Roca, host of Women Talk Money at Fidelity Investments and a certified financial planner.<\/p>\n IDENTIFY HOW MUCH YOU NEED TO SAVE<\/p>\n “Growing up my dad got laid off three different times, and so he really drilled into us that you need three to six months of living expenses,” says Vanguard’s Byrne.<\/p>\n While the conventional wisdom is that you should be able to cover at least a half year’s worth of expenses in an emergency, some financial advisers recommend stashing away enough money for a year or more.<\/p>\n And if you own your own business, you might need as much as two years’ worth of essential expenses.<\/p>\n “Whether it’s the markets or life, there is always going to be volatility. Your ability to withstand that or take advantage of it is the difference between failure and success,” says Doug Boneparth, president of Bone Fide Wealth, a New York financial advisory firm.<\/p>\n Women need larger cash cushions than men, due to a bunch of factors, including the gender pay gap, opens new tab<\/a>, Fidelity’s Roca says. About 21% of women reported having no cash in savings compared with roughly 11% of men, according to Fidelity research.<\/p>\n A female construction worker stands outside a construction site in Manhattan. REUTERS\/Shannon Stapleton<\/p>\n KEEP YOUR EMERGENCY FUND SEPARATE FROM OTHER MONEY<\/p>\n Do not park emergency cash where you put everyday checking and savings. If those sit side by side, the emergency fund tends to become “savings-adjacent” with the potential to be tapped for non\u2011emergencies. Use a different financial institution if you need to.<\/p>\n “Whether it’s $20 per paycheck or a larger amount, the act of labeling the account ‘Emergency Fund’ and watching it reach that target changes behavior,” Roca says. “People feel safer investing and spending appropriately when they know that backstop is in place.”<\/p>\n AUTOMATE YOUR EMERGENCY SAVINGS<\/p>\n Set up either a flat dollar amount or a percentage of your paycheck that goes straight to that designated emergency account every pay period. (I sock $200 per month into a high-yielding money account at Vanguard, and, after reporting this piece, plan to up that amount.)<\/p>\n Rate shopping is fine, but separation and automation are the key priorities. You want the account to grow on autopilot, and be hard to raid impulsively.<\/p>\n A person walks past a First Republic Bank branch in Midtown Manhattan in New York City. REUTERS\/Mike Segar<\/p>\n Emergency savings are a hot topic in the workplace these days, too. Some employers now offer payroll-deducted emergency savings<\/a> through regular paycheck deductions and even seed or matching contributions.<\/p>\n Building a large emergency fund does not happen quickly, so start with a small target \u2014 perhaps $500 or $1,000 \u2014 and then boost that goal once you hit it.<\/p>\n INVEST YOUR EMERGENCY FUND IN SAFE ASSETS WITH HIGHER YIELDS<\/p>\n High-yield savings or money-market accounts, shorter-term certificates of deposit and even short-duration U.S. Treasuries are a safe place to park your cash.<\/p>\n “It’s got to be a low-risk asset, liquid and accessible,” Boneparth says.<\/p>\n While an emergency fund does not guarantee you will be insulated financially from a layoff, it does buy peace of mind.<\/p>\n “The goal isn’t to eliminate worry,” Roca says. “It’s to replace uncertainty with a simple plan you actually follow.”<\/p>\n If you have an emergency fund, I want to hear from you. I’m also looking to interview folks who lost a job and are willing to share their financial journeys. Write to me at onthemoney@thomsonreuters.com, opens new tab<\/a>.<\/p>\n By Lauren Young; Editing by Lisa Shumaker<\/p>\n Our Standards: The Thomson Reuters Trust Principles., opens new tab<\/a><\/p>\n