- Emergencies can come in all shapes and sizes. A new GOBankingRates study found the average cost for nine different types.
- Layoffs fall into the most expensive emergency category, but there are smart money moves you can make after you lose your job.
- Amy Blacklock saw it all as a human resources representative, and she knows how important an emergency fund is to have.
It’s called an emergency for a reason, right? One doesn’t just creep up on you — it’s more like, WHAM! While no one should sit around waiting for an emergency to occur, there are many reasons you should be financially prepared when one hits. But how much should you have saved?
Is there a magic number you need to have squirreled away without feeling like your money isn’t working as hard as it could be for you? GOBankingRates examined data from six different sources in a recent study to help you decide.
The data revealed a wide range for the average cost of nine typical major emergencies:
|Furloughs/government shutdowns/job loss||$28,824|
Losing one’s job is the most expensive emergency to prepare for. While almost $30,000 may sound like a lot to keep in reserve, it’s not. I’ve worked in human resources, and I’ve seen first-hand how important it is to keep an emergency fund.
Layoffs Can Happen — an Emergency Fund Is Essential
Working in HR often puts you in challenging situations. There are not many things more uncomfortable than seeing someone lose their job and paycheck.
I’ve witnessed countless examples and heard even more stories of employees unprepared to handle this financial emergency. Some recovered with mere dings to their credit for late payments or increased debt to tide themselves over. Many others needed to sell physical assets, had vehicles repossessed or even lost their homes.
When your income shuts off, it might not be long before other things are, too, if you don’t have savings to carry you through until the next paycheck.
Now picture the possibility of two or even three emergencies occurring at the same time — would you be financially prepared? The recent government shutdown pushed many federal workers to their breaking points. And of course, if you remember the last recession, you know national financial emergencies can happen quickly and without warning.
So, help your savings help you. Build your emergency fund so you’re prepared should the unfortunate happen.
How Much to Save in Your Emergency Fund
The GOBankingRates study determined how much you should aim to save to be prepared for each type of emergency, and why.
|Emergency||How Much You Should Save|
|Furloughs/government shutdowns/job loss||$30,000: 6 months of pay based on the U.S. median household income|
|Hurricanes||$13,000: The high end of the average cost of repairs.|
|Floods||$30,000: The cost of damage for a typical house receiving 1 inch to 3 inches of interior water depth.|
|Earthquakes||$5,200: The upper range of the average cost.|
|Medical emergencies||$1,500: The high end of the average cost.|
|Car accidents||$1,500: The upper range of the average cost.|
|Tornadoes||$13,000: The high end of the average repair costs.|
|Sudden Death||$15,000: The highest average cost of a traditional funeral service and burial.|
|Fires||$13,000: The average of widely varying clean-up and restoration costs.|
Mother Nature is unpredictable and the next recession might be around the corner. Businesses will always keep merging, cutting back or failing entirely. Be prepared. Eliminate debt and establish your emergency fund so your savings can help you if and when you need them.
Keep reading to learn when you should be using your emergency fund.
More From Our Smart Money Squad
- It Never Fails — Why I’m Always Shocked at How Little Americans Have Saved
- He’s a Spender and I’m a Saver: How We Grow Our Savings Together
- Confessions of a Former Bill Collector
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