Should You Increase Your Emergency Fund in Preparation for the Presidential Election?
Written by
Jordan Rosenfeld
Edited by
Jenna Klaverweiden
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An emergency fund is important to help you stay prepared for the unexpected, such as job loss, unforeseen expenses or other emergencies.
Does an election season, which can feel volatile, count as a time of possible emergency? Dramatic changes in administrations can certainly have an impact on the economy, and thus on your own financial picture and savings.
With President Joe Biden having dropped out of the 2024 presidential race and endorsed his vice president, Kamala Harris, for the role, a new level of uncertainty has emerged. Though one might assume that Harris’ economic policies are similar to Biden’s, if she wins, her administration could still do things differently.
Financial experts explain whether or not it’s a good idea to beef up your emergency fund in the lead-up to a presidential election.
Think Long Term
Chris Urban, CFP, RICP, founder of Discovery Wealth Planning, suggested that rather than be influenced by the short term, you should position your emergency fund as if there were no presidential election.
“What do I mean by this? Historical data strongly suggests that long-term performance of financial markets is not impacted by which political party holds the presidency, Congress, etc.,” he said.
Instead, if you have the luxury of the long term to save and invest, Urban recommended remaining in an investment strategy that you are comfortable with for many years or decades even.
But Be Realistic
Having said that, Urban added that if you anticipate any financial risk, or think you will need access to assets in an emergency fund within the next year or so, then you should absolutely consider beefing up your savings.
“Importantly, this would be my recommendation even if there [were] not a presidential election this year,” Urban said.
It’s Never a Bad Idea To Save More
Dalton Tigner, a partner at Tigner Insurance, said that increasing your emergency fund ahead of elections is always a prudent strategy.
“Policy changes and economic uncertainty can impact jobs, income and expenses in unexpected ways,” he said.
In his experience with clients, those with six to 12 months’ worth of living expenses in emergency savings were able to weather temporary loss of income or higher costs without damaging their long-term financial security.
“They avoided high-interest debt and maintained their standard of living,” he said.
Save an Extra $50 to $100 per Month
For most people, adding even an extra $50 to $100 per month to your emergency fund now can provide significant peace of mind, Tigner said.
“While the outcome of any election is hard to predict, preparing for potential impacts to your personal economy is a wise decision. Having savings to rely on allows you to focus on your work or business with minimal worry or distraction,” he explained.
“In my experience, financial preparation and emergency funds are invaluable for navigating times of change or instability,” said Justin Godur, a finance advisor and the founder of Capital Max.
If nothing else, building up your emergency cushion will bring you extra security for anything unexpected.
Focus On Investments
Godur pointed out that every election cycle brings a degree of uncertainty to the markets.
“Historically, we’ve seen both positive and negative economic responses depending on the winning candidate’s policies and the market’s perception of their impact on business and economic growth,” he said. “While it’s tempting to make drastic financial decisions based on the potential outcomes, a balanced approach is often more prudent.”
His recommendation is to prioritize diversifying investments over beefing up an emergency fund.
“In my professional experience, diversifying investments is key. Elections can indeed lead to market volatility, but it’s not a given that the economy will take a downturn. Instead of hoarding cash, consider spreading your investments across different asset classes,” Godur explained.
A diversified investment strategy not only mitigates risk but also positions you to take advantage of potential market upswings, he said.
Of course, Godur still recommended an emergency fund, regardless of the election.
“Aim for three to six months’ worth of expenses. This fund acts as a buffer against any short-term economic disruptions that could arise from political changes. It’s also beneficial to stay informed and adapt your financial strategy as the political landscape evolves. Engage with financial advisors who can provide personalized advice based on your unique situation,” he said.
While it’s wise to be cautious, according to Godur, it’s equally important not to let election anxiety dictate your financial decisions entirely.
In the long run, it’s better to be prepared than caught off guard financially, and more emergency savings can’t hurt.
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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