The coronavirus pandemic revealed some painful financial truths, including this one: Americans probably do not have as much saved in emergency funds as they should.
Almost 40% of people who had emergency savings prior to March 2020 dug into that pile of cash during the coronavirus pandemic, according to a survey conducted by YouGov for Forbes Advisor.
Among those folks, about 73% spent half or more of their savings, leaving them with precious little in reserve should another emergency — such as a job loss or sudden illness — rear its head. That includes 29% who exhausted their emergency cash, leaving them no cushion at all.
The problem of having depleted savings is all too real for people who now are seeing unemployment benefits scaled back and a moratorium on evictions soon to expire.
Prior to the pandemic, the most common amount saved for emergencies was enough to cover one to three months of expenses, the survey found, with 31.6% of respondents saying they had tucked away that amount.
About 20% of respondents had saved enough to cover three to six months’ worth of expenses, the amount many experts suggest is the minimum you need for a decent emergency savings fund.
According to a Forbes Advisor report on the findings:
“The pandemic revealed how unprepared Americans were to withstand any financial hardship beyond a short-term job loss. An overwhelming majority of households used the first stimulus check last spring to pay for rent, utilities, food or other household essentials, according to a U.S. Census Bureau survey.”
Rebuilding your emergency fund
If your stash of cash has crumbled from mountain to molehill, it is time to begin rebuilding your emergency savings.
In May, Money Talks News founder Stacy Johnson used his podcast to offer tips for growing your reserve of crisis cash. You can listen to his thoughts in “What the Coronavirus Can Teach Us About Building an Emergency Fund.”
You can also learn more about how to build up your savings in “9 Tips for Starting an Emergency Fund Today.” For example, although we rarely recommend putting off saving for retirement, there are times when such a move is prudent:
“Temporarily reduce your 401(k) contributions to the lowest amount that will still allow you to take advantage of company matching funds. Direct the extra cash to your emergency fund.”
Finally, remember that your emergency money should be kept where it is safe and easily accessible — such as in a savings account. Visit Money Talks News’ Solutions Center for help finding the best rates.
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