Single Employee, Family, Retired: How Much Cash You Need in an Emergency Fund at Each Stage of a Career, According to Advisors

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If you’re feeling volatile amid stock market volatility, high inflation and rising interest rates, you may wonder how much cash you really need.

But the exact amount in your emergency fund depends on the situation and needs of your family, say financial experts.

Still, with two-thirds of Americans worried about recessionIt’s easy to see why investors are concerned about savings.

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In fact, more than half of Americans are now Concerned about your level of emergency savingsAccording to a June survey by Bankrate, up 44% in 2020.

Many people are concerned about falling short: Nearly one-third of Americans have less than three months’ worth of savings in savings, and nearly one-quarter have no emergency fund, Bankrate found.

Although rock-bottom returns have made cash less attractive over the years, it may changing as interest rates rise, And experts say a value in peace of mind brings savings.

Here’s how much cash savings you need to save at different times in your career, according to financial advisors.

Dual earners: Set aside at least 3 months of expenses

The typical recommendation for dual-income families is three to six months of living expenses savings, said Christopher Lyman, a certified financial planner with Allied Financial Advisors in Newtown, Pennsylvania. Rationale: Even if an earner loses his job, there are other sources of income to help the family sustain expenses.

Single Employee: Save 6 months or more

Katherine Vallega, a CFP and wealth advisor at Green Bee Advisory in Winchester, Massachusetts, suggests keeping 12 to 24 months of expenses in cash.

Personal finance expert and best-selling author Suze Orman also recommends saving extra, and recently told CNBC that she emphasizes spending eight to 12 months. “If you lose your job, if you want to quit your job, it gives you the freedom to continue paying your bills while you’re figuring out what you want to do with your life,” he said.

Entrepreneurs: Reserve 1 year business expenses

With more economic uncertainty looming, Lyman advises entrepreneurs and small-business owners to try to set aside a year’s worth of business expenses.

“Taking this advice saved some of our business owner customers from closure due to the pandemic,” he said.

Some people find it uncomfortable to have so much money on the ‘sideline’ and make nothing, especially now that stocks seem to offer a great buying opportunity.

Christopher Lyman

Certified Financial Planner with Associate Financial Advisors LLC

Retired: Keep 1 to 3 years’ expenses in cash

For example, if your monthly expenses are $5,000 per month, so you receive $3,000 from pensions and $1,000 from Social Security, you may need less cash, about $12,000 to $36,000.

“It allows you to maintain your long-term investments without the risk sell when the stock market is downKoppel said.

Savings is a ‘highly sentimental subject’

There is some flex in the “right” amount. Money is a “very emotional topic,” Lyman acknowledged, noting that some customers deviate from his savings recommendations.

“Some people are uncomfortable having that much money on the ‘sideline’ and earning nothing, especially right now when stocks are offering a great buying opportunity,” he said.

Others were previously “cautious” and now feel “absolutely concerned about the market,” which prompts them to save more, Lyman said.