Is Your Emergency Fund Bigger or Smaller Than Average?

Emergency savings is the ticket to avoiding financial disaster. Sadly, it’s not a matter of if some unexpected expense will happen — it’s a matter of when. Everyone faces surprises, whether it’s a job loss you didn’t anticipate, your car’s brakes going kaput, or your fridge deciding not to keep food cold any longer.

When these surprise costs happen, you could find yourself reaching for credit cards if you aren’t prepared — and you don’t want that to happen to you. That’s why it’s essential to have a good amount of money in a savings account just in case you need it.

If you’re not sure whether you have enough emergency money saved, it can be helpful to compare your rainy-day fund to that of your fellow Americans. Check out the data below to see how your account balance stacks up. 

How does your emergency fund compare? 

According to research from the TransAmerica Center for Retirement Studies, here’s how much the average American has set aside for emergency savings:

• The median emergency savings for all workers is $5,000 
• Generation Z workers have a median savings of $2,000
• Millennials have a median savings of $5,000
• Generation X members have a median savings of $5,500
• Baby boomers have $10,000 in median savings

Sadly, many Americans also have no emergency savings. In fact, out of all workers, about 15% have nothing set aside for emergencies. Others are confused about how much they have available, with 22% indicating they don’t know how much they have saved exactly. 

Does it matter how your emergency fund stacks up to the average?

It’s interesting to see how your emergency savings compares with your peers. If you have far less than others, this may be enough to motivate you to start saving more. If you have far more, then you may feel more confident about your prospects of remaining financially stable, even in the face of disaster.

Ultimately, though, what’s most important is that you’re financially ready for any surprises. After all, your income and your essential costs may be very different from other Americans, and you are the one who is going to need to be ready to cover the surprise bills you face.

To make certain you’re prepared, most experts recommend you have around three to six months of living expenses saved. You can err on the lower end if your job is pretty stable and err on the higher end if you have more uncertainty at work, serious health problems, or a family to support on your own. 

If you don’t have enough emergency savings, there are ways to change that. You should:

• Open a dedicated high-yield savings account. You want your money in an accessible savings account earning a generous rate.
• Set up an automatic monthly contribution. Look at your budget and find out how much money you can free up to invest — and be willing to make sacrifices, like not eating out for a while, until your emergency fund is large enough to cover you.
• Continue to make your automatic contributions and save any windfalls, like a bonus at work, until you have the recommended amount saved.

You should prioritize this over virtually all other financial goals, except for covering the bills and contributing enough to an employer-sponsored 401(k) or other retirement plan to earn a match. Your emergency fund is the foundation of your financial stability and can keep you from utter disaster if things go wrong.

Once you have enough to personally cover your own threat of emergency, it doesn’t matter what your peers do — you’ll be prepared for whatever life sends your way.