Experts have typically agreed that anemergency fundshould have three to six months worth of living expenses.
Then the pandemic hit.
With many struggling to save up even three months worth, saving a years worth can seem nearly impossible.
(Spoiler alert: its through high-yield savings accounts likeSoFi Checking and SavingsandVio Cornerstone Money Market Savings.)
The Pros and Cons of a 12-Month Emergency Fund
According to theU.S.
Bureau of Labor Statistics, the average duration of unemployment as of April 2024 was just about 20 weeks.
So being on the lower end of the three to six months benchmark wouldnt get you very far.
And those numbers can always change.
Just a few years ago in June 2021, the average was just over 31 weeks.
Our team has compiled alist of creative waysyou can fatten your bank account this week.
This is a long list, so dont get overwhelmed.
Go ahead and start now, but be sure to bookmark this post so you could easily return later.
Well keep it updated as offers changes or expire.
Consider your individual situation.
Putting off retirement contributions means youll miss out on the chance to letcompound interestgrow your money.
Is a 12-Month Emergency Fund Right For Me?
There may be other reasons.
First, youll want to calculate what your actual savings goal is.
Youre not simply taking your annual salary and making that your goal.
This will show you your essential monthly costs stripping away all the things you could do without.
Multiplying your monthly bare-bones expenses by 12 will give you your target savings goal.
If you currently have money in emergency savings, subtract that amount from your goal.
Then youll know how much you still need to save up.
Cutting out allfun money spendingwill only make it excruciating to reach your goal.
Also remember, youll need to balance this with any other financial priorities you have.
While youre examining your budget, look for areas where you’re free to make cuts.
Do you have subscription services you dont use?
Can yousave money on groceries?
Are youoverpaying for cell phone service?
Negotiating with service providers isnt successful 100% of the time, but it doesnt hurt to ask.
Do you have items around the house you cansell online?
Can youtake on a side gigorpart-time job?
Whens the last time youtalked to your manager about a raise?
Sometimes securing new employment is the best way to get a significant salary bump.
Put all that extra cash plus any windfalls like a tax refund into your savings account.
confirm your emergency savings are in ahigh-yield savings accountso youll earn more interest.
It could take a couple years or more to build that 12-month emergency fund.
Nicole Dow is a former senior writer at The Penny Hoarder.
(Can you sense my millennial sarcasm there?)
You know which ones were talking about: rent, utilities, cell phone bill, insurance, groceries…
