3 Signs You Need to Boost Your Emergency Fund Now
by Christy Bieber | Updated Sept. 16, 2021 - First published on March 11, 2021
Is your emergency fund too small? If any of these signs apply to you, it might be.
An emergency fund can be your ticket to staving off financial disaster. When you have money in a savings account earmarked for emergencies, you're less likely to need to borrow when you find yourself in the midst of a problem. Unexpected expenses won't leave you saddled with months or years of debt payments. And it will be easier to avoid dire consequences if your income suddenly shrinks.
Unfortunately, many people either have no emergency fund at all or one that's too small. Of course, having something saved is better than nothing. But there are times when it definitely pays to prioritize a bigger rainy day fund.
In fact, if any of these three signs apply to you, you should take steps ASAP to deposit more into a high-yield savings account for potential emergencies that could arise. And don't forget to use our emergency savings calculator to see how much you should have stashed away.
1. You're worried about a job loss
Emergency funds don't just protect you from unexpected expenses; they help ensure you can cover your current bills even if you experience a drop in income. If you're worried your job isn't stable, an emergency fund is more important than ever.
You'll want to make absolutely sure you have a large enough emergency fund to keep you afloat until you can find a new position. That way, you should be able to avoid financial disasters such as foreclosure, eviction, or repossession. And with unemployment rates very high right now, it could take a little longer to find a new position. It's definitely worth having a bigger emergency fund if you're concerned you may lose your job in the near future.
2. You couldn't cover even a small unexpected expense
Many Americans have no savings at all set aside. As such, having any money saved for emergencies is a major feat and something to celebrate. But if your savings account has a very small balance, it may not provide as much protection as you deserve.
If you aren't confident your savings will cover even a small unexpected expense, think about prioritizing your emergency fund. Don't worry if it takes time. With each dollar that you put in, you get one step closer to the peace of mind that comes with knowing you can cope with whatever goes awry.
3. You're solely dependent on your income
Many people don't have a spouse, parent, or partner to fall back on if they lose their financial footing. If that's the position you're in and your income is your sole source of support, it pays to have a larger emergency fund. After all, if there are two breadwinners, it's unlikely both would lose their earnings at the same time. In that situation, an emergency fund might not have to stretch as far.
If you're in a single-income household, it's generally best to err on the side of having at least six months of living expenses saved up -- and perhaps even more than that if it might take time to find a new job.
Ultimately, you should think about how precarious your financial situation is. The more concerned you are, the more important it is to build up your emergency fund.
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