In a recent study conducted by Affirm, nearly 60% of Americans mistakenly believe that the U.S. is currently in a recession, despite second-quarter economic growth. This highlights the need for accurate information and guidance when it comes to financial decision-making, especially during times of economic uncertainty.
While major financial institutions like Goldman Sachs and JP Morgan have raised recession forecasts, other experts are still optimistic about an economic “soft landing.” This means that the Federal Reserve’s policies are not expected to cause a downturn. However, a weaker-than-expected jobs report for July has triggered stock market volatility, adding to the uncertainty in the financial landscape.
According to a survey by Bankrate, almost 60% of Americans are not comfortable with their level of emergency savings, up from 48% in the previous year. Having emergency savings is crucial to cover expenses in the event of a job loss or unexpected bills, regardless of the economic climate.
Financial advisors recommend different levels of emergency savings based on individual circumstances. For double-income families, saving at least three months of living expenses is advised. However, the guideline can be adjusted depending on the reliability of income sources. For single individuals or families with a single income, experts suggest saving at least six months of expenses. Higher levels of cash reserves can provide more flexibility in case of a job loss or economic downturn.
Certified financial planner Greg Giardino recommends three months of living expenses for double-income families, with adjustments based on income reliability. Douglas Boneparth prefers six to nine months of savings for single earners, emphasizing the importance of having extra cash for unforeseen circumstances. Catherine Valega recommends 12 to 18 months of living expenses in safe, liquid investments for single earners, taking a more conservative approach.
The exact amount of emergency savings needed varies depending on individual circumstances and family needs. Entrepreneurs or small business owners with unsteady income may benefit from higher levels of savings, ranging from eight to 12 months of expenses. It is important to assess your unique situation and consult with financial advisors to determine the appropriate amount for your emergency savings fund.
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