How Many Americans Are Financially Prepared for a Layoff?

You've probably noticed a lot of chatter about layoffs recently. Many companies have announced they would be laying off a portion of their workforce over the last few months.

When you're used to bringing in regular income, a sudden job loss can devastate your finances. Unfortunately, many Americans aren't financially prepared for a layoff. Find out how to protect yourself so you're not left scrambling if you lose your job without much notice.

30% of Americans have $500 or less saved

Unless your employer offers you a severance package, you could be without pay after being laid off. Many workers immediately file for unemployment to help bridge the gap. However, it can take time for unemployment claims to be processed and checks to be received. This is why having extra cash in a savings account can be helpful.

The Motley Fool Ascent surveyed Americans in July 2023 to gather more data about their savings habits. The study showed that 71% of Americans have $5,000 or less saved. Even more alarming, 30% of Americans have $500 or less in their savings accounts.

These stats suggest the average U.S. worker is likely not financially prepared for a layoff. Those with minimal savings may feel financial stress if they unexpectedly lose their job.

Rent or mortgage payments can easily cost $1,000 to $2,000 or more -- depending on where you live and your housing situation. Neglecting to save could hurt you in the future.

Do this to protect yourself financially

It's best to plan for emergencies before they occur. Building a sizable emergency savings fund is one way that workers can prepare for significant life changes like layoffs. Knowing you have extra cash in the bank can be a huge blessing when something unexpected happens.

You should consider how your finances would be impacted by a layoff even if you feel confident about your role and your company's future. Layoffs can impact anyone, and when it happens, many workers are totally caught off guard. Now is a good time to prioritize savings contributions.

Setting aside a portion of your paycheck into a savings account is smart. Even if you can only afford to save a little bit, your savings will add up over time. Plus, by keeping your savings in a bank account that earns interest, you can earn interest as your money sits in the bank.

Automation is a game changer for savers

Remember: It's never too late to start saving.

If you're worried you'll forget to save regularly, automation can help.

You can automate your savings through your online bank account. Once you enable automatic transfers, money is automatically transferred from your checking account to your savings account on payday or another preset date each month. Doing this can save you time and ensure you stay on top of your savings goals.

It's best to keep your savings in a separate bank account to avoid accidentally spending it.

If you need a savings account, check out our list of the best high-yield savings accounts to compare options and learn more. For additional tips, check out our personal finance resources.