Most Americans have three months or less in emergency savings. How much do you need to survive a layoff?
The U.S. economy is currently strong and unemployment is low overall. Still, nearly one in three Americans are experiencing layoff anxiety this year, Clarify Capital reports. But some of that anxiety may come down to inadequate savings.
Clarify Capital also found that 54% of Americans have three months or less in an emergency fund, while 18% have no emergency fund at all. But here’s how much you need to save to get through a layoff.
When you have a “normal” job
The amount you should put into your savings account really depends on your type of job. In general, if you have a “normal” or “normal” job, you should aim to save enough money to cover at least three months of essential living expenses.
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Expenses you might want to cover with your emergency fund may include:
- Rent or mortgage payments
- car payments and insurance
- Utilities including cell phone and home internet service
- Healthcare and Medication
- food
- personal hygiene products
The logic is as follows: You might have a job in most companies that needs one of you. However, it can still take time to send out your resume, schedule an interview, attend the interview, wait for a hiring decision, and negotiate an offer. So, by putting three months’ worth of expenses in the bank, you give yourself the time you need to go through the process without automatically taking on the debt. This means charging the cost to your credit card and paying it back over time. .
When there are more niche jobs
If you’re a higher-level employee or have a very unique job (meaning there’s no one like you in a typical large company), it’s generally a good idea to save enough money to cover six months of essential living expenses. More than just living expenses. reason? In the rare case that your job is a senior or niche role, it can take three months or more to get hired after being laid off. So in those cases, you need extra time to find a job and you need financial protection to do so.
Let’s say you only have three months’ worth of money saved in the bank, and after about 12 weeks of job searching, you can’t find a role similar to the one you were laid off from. At that point, you may have to accept a lower-paying or lower-level role, or else take on debt to be able to continue your job search. Neither situation is ideal.
Make sure you are well protected
No matter how good the economy is, you can lose your job through no fault of your own. If you’re worried about getting laid off this year, do your best to increase your savings to a level that will provide you with the protection you need. It’s a great way to make stressful situations a little less painful.
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