2 in 3 Americans Are Rethinking Their Emergency Funds Right Now. Here's Why You Should, Too

A lot of people these days are feeling the strain of inflation. They're also worried about a potential recession, and understandably so. Even the Federal Reserve has come out and said that a recession is likely in 2023, albeit a mild one.

Because of current economic conditions, it's a really good time to assess your emergency fund needs. A good 66% of Americans say that current economic conditions have made them rethink how much money they need in emergency savings, according to a recent Quicken survey. So if you haven't given your cash reserves a closer look, it's time to make that a priority.

Do you have enough savings to get through a period of unemployment?

During recessions, it's common for more jobs to land on the chopping block. And that's why it's really important to make sure you have enough money saved to get through a period of unemployment. If you don't have a robust enough emergency fund, you might have to resort to costly credit card debt in the event of a layoff.

Take a look at your monthly expenses and figure out how much you spend on essential bills -- things like rent, car payments, utilities, and food. Next, look at your savings account balance. Do you have enough money in the bank to cover at least three full months of essential expenses? If not, then it's a sign that your emergency fund could use a lift.

In fact, three months' worth of bills is really the minimum amount of expenses your emergency savings should cover. If you lose your job, it could take you three months to find another even in the best of economic circumstances. During a recession, it might take you four months, six months, or longer to get hired again. So the more cash reserves you're able to build, the better.

How to boost your emergency fund

There are different steps you can take in the coming months to shore up your emergency fund. First, if you haven't yet spent your tax refund, bank it. Whether that refund amounts to $500, $1,000, or $2,000, that's money you can sock away in your savings in case you end up needing it in a pinch.

You can also boost your cash reserves by cutting back on spending. This doesn't mean you should stop buying vegetables at the grocery store or cancel the streaming service you rely on for entertainment that costs under $20 a month. Rather, it means to cut back in a reasonable manner.

Instead of dining out twice a week, do it once and bank the difference. And if your emergency fund needs work, perhaps skip the concert this month that will cost you $150 to attend.

Finally, look to the gig economy for an income boost. If you're able to take on a side hustle for a period of time, it might allow you to grow your earnings nicely and put that extra cash into savings.

Although the economy seems to be in a good place right now, we don't know what the rest of the year has in store. Between that and persistent inflation, it's definitely a good time to reassess your emergency fund needs and make sure you have enough cash in the bank to get through a period of joblessness.