How Much Savings You Really Need to Feel Confident in a Recession
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Right now, I've got about $25,000 sitting in a high-yield savings account earning 4.00% APY. If I lost my job suddenly and paycheck stopped rolling in, that stash could cover my family's groceries, rent, and bills for a few months while I get another job.
But what if it takes me more than a few months to find a new job? Do I have enough savings to ride out a recession?
Aiming for a six-month cushion
During the Great Recession, the median unemployment spell lasted over 25 weeks -- basically six months.
That's why many experts lean toward the higher end of the "three to six months" savings rule, especially if you've got kids, a mortgage, or just want maximum peace of mind.
Here's how six months of savings breaks down depending on your monthly spend:
| Monthly Expenses | Savings Goal |
|---|---|
| $3,000 | $18,000 |
| $5,000 | $30,000 |
| $7,000 | $42,000 |
| $10,000 | $60,000 |
This is just a rough guideline, of course. Everyone's money situation is unique, and that's what makes personal finance personal.
If your household has two incomes, losing one paycheck may not be as big of a hit. So you might feel fine with a smaller safety net.
On the other hand, if you're the main breadwinner and your career is in a niche field where it could take longer to find work, you may want to give yourself an even bigger cushion.
There's no one "right" number for everyone. The best emergency fund is the one that helps you feel confident and secure based on your circumstances.
Where to keep your safety net
You want two things from your emergency fund: safety and easy access. That's why a high-yield savings account (HYSA) is the best spot to keep your cash.
HYSAs are just like regular savings accounts, except they pay way more interest. Today's top HYSAs earn around 4.00% APY, which is about 10x more than the national average.
They're also FDIC insured up to $250,000, so your cash is federally protected no matter what.
The last couple of years I've earned over $2,000 in interest by keeping my cash savings in a high-yield account. It's the easiest money I've ever made.
Don't have an HYSA yet? One of my favorites right now is the LendingClub LevelUp Savings account. It earns 4.20% APY with $250+ in monthly deposits. Read our full review here to learn why it's a good fit for most people.
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LendingClub LevelUp Savings
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- Competitive APY
- No fees
- Easy ATM access
- Unlimited number of external transfers (up to daily transaction limits)
- Requires you to make monthly deposits to earn the best APY
- ACH outbound transfers limited to $10,000 per day for some accounts
- No branch access; online only
The LendingClub LevelUp Savings account has a lot to offer. At the top of the list is its high APY, though you must deposit monthly to earn the best rate. Next is zero account fees, a strong and straightforward perk. Finally, you get a free ATM card, which you can use to withdraw from thousands of ATMs nationwide. Interested? You can open an account with $0.
Save less and stretch your dollars
My family normally spends $6,000-$7,000 a month. That means our $25,000 stash would only last about three to four months.
But the truth is if things really got hairy we could switch to a barebones budget. This means pausing all discretionary spending and dropping to just the essentials. Like holding off on travel, cutting subscriptions, and cutting back on extras while times are tight.
My guess is we could trim our monthly spending closer to $4,500 a month, stretching our cash pile to last six full months of coverage.
It's not glamorous, but it buys time, options, and peace of mind.
How to build your fund faster
If you're not at your six-month mark yet, here are a few quick ways to beef up your savings:
- Automate savings: Set up transfers every payday so saving happens on autopilot.
- Bank your windfalls: Tax refunds, bonuses, birthday money -- funnel it straight to savings.
- Trim temporarily: One less splurge could free up $200 a month. That adds up over the year
- Max your APY: Every extra percentage point of interest helps your balance grow faster.
Momentum might feel slow at first, but once your savings snowball starts rolling, it gets easier (and a lot more exciting!).
The bottom line
Recessions are unpredictable. But one thing's for sure: nobody ever regrets having extra cash when life gets messy.
So whether your number is $5,000, $25,000, or $50,000, start saving today. The confidence and calm that comes with a strong emergency fund is worth every penny.
Ready to grow your cushion? Explore today's best high-yield savings accounts and start earning a top-tier APY with zero risk and full flexibility.
Our Research Expert
Joel O’Leary is a full-time Personal Finance Writer at Motley Fool Money, covering credit cards, bank accounts, investing, mortgages, and other personal finance topics. Joel has been writing about personal finance since 2018, previously leading editorial content for the How To Money podcast and serving as a resident writer at Budgets Are Sexy. He bought his first rental property at age 18, funding the down payment with savings from his high school job at McDonald’s -- a testament to his lifelong passion for smart money decisions. His work aims to make personal finance accessible and actionable for everyday readers. When he’s not writing, Joel enjoys surfing and spending time with his family.