How much cash in emergency fund do you need at every career stage

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If you’re feeling unsettled amid volatile stock markets, high inflation, and rising interest rates, you may be wondering how much cash you really need.

But the right amount to have in your emergency fund depends on your family’s circumstances and needs, financial experts say.

However, with two-thirds of Americans worry about a recessionIt’s easy to see why investors worry about saving.

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Indeed, more than half of Americans today worry about their emergency savingsup from 44% in 2020, according to a June survey from Bankrate.

Many are concerned about the shortfall: Nearly a third of Americans have less than three months of savings and nearly a quarter have no emergency funds, Bankrate found.

While bottoming out returns have made cash less attractive over the past few years, it may change when interest rates rise. And experts say there’s a value to the peace of mind that savings brings.

Here’s how much cash savings you’ll need at different times in your career, according to financial advisors.

Dual income earners: Set aside at least 3 months of expenses

Christopher Lyman, a certified financial planner with Allied Financial Advisors in Newtown, Pennsylvania, says the typical recommendation for dual-income families is to save three to six months’ worth of living expenses. Why: Even if a person loses a job, there are other sources of income that help the family cover expenses.

Single workers: Saving for 6 months or more

Catherine Valega, a CFP financial and financial advisor at Green Bee Advisory in Winchester, Massachusetts, recommends keeping expenditures in cash for 12 to 24 months.

Personal finance expert and bestselling author Suze Orman has also recommended extra savings and recently told CNBC that she’s boosted spending by eight to 12 months. “If you lose your job, if you want to leave your job, that gives you the freedom to keep paying your bills while you’re figuring out what you want to do with your life,” she said. speak.

Entrepreneurs: 1 year provision for business expenses

With the economy more uncertain, Lyman recommends entrepreneurs and small business owners try to set aside a year’s worth of business expenses.

“Implementing this advice has helped some of our business owner customers to close due to the pandemic,” he said.

Some people feel uncomfortable having a lot of money ‘on the sidelines’ and earning nothing, especially right now when stocks are offering great buying opportunities.

Christopher Lyman

Certified financial planner with Allied Financial Advisors LLC

Retirees: Keep 1 to 3 years of expenses in cash

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For example, if your monthly expenses are $5,000 per month, you get $3,000 from your pension and $1,000 from Social Security, you may need less cash, about $12,000 to 36,000 dollars.

“This allows you to maintain your long-term investments without risk sell when the stock market goes down“, Koeppel said.

Saving is a ‘very emotional subject’

There is some flexibility in the “right” amount. Lyman admits that money is a “very emotional subject,” noting that some clients have changed his savings suggestions.

“Some people feel uncomfortable having a lot of money ‘on the sidelines’ and earning nothing, especially right now when stocks are offering great buying opportunities,” he said.

Others were previously “cautious” and now feel “absolutely nervous about the market,” which prompts them to save significantly more, Lyman said.

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