How much of a safety net should I have? | NatWest Money Blog (2024)

FAQs

How much of a safety net should I have? | NatWest Money Blog? ›

It's recommended you have at least 3 month's worth of living expenses in a savings safety net, ideally up to 6 months'.

How Much Should You Keep? A common rule of thumb is to have enough in savings to cover 3 to 6 months' worth of living expenses. A more conservative view would be to have 6 to 12 months' worth of living expenses in reserve.

“Based on experience, I recommend ensuring this $10,000 goes into creating or bolstering an emergency fund if you don't already have one.” Ideally, he said this should cover three to six months of living expenses and be kept in a high-yield savings account for easy accessibility.

Saving $5,000 in an emergency fund can be enough for some people, but it is unlikely sufficient for a family. The amount you need in your emergency fund depends on your unique financial situation.

Generally, your emergency fund should have somewhere between 3 and 6 months of living expenses. ¹ That doesn't mean 3 to 6 months of your salary, but how much it would cost you to get by for that length of time.

For some people, a $1 million nest egg could make for a very comfortable retirement. For others, a sum of that nature might fall short. Similarly, for many working Americans, a $20,000 emergency fund will indeed be more than adequate. But if you're a higher earner with large bills, you may be an exception to that rule.

If you're going to need $100,000 or more in the near future, then it's fine to have that much money in your savings account. There's one situation, in particular, where people often need this much or more in savings: when they're planning to buy a home.

How many Americans have $100,000 in savings? About 26% of U.S. households had more than $100,000 in savings in retirement accounts as of 2022, according to USAFacts, a nonprofit organization that analyzes data from the Federal Reserve and other government agencies.

The classic approach to doubling your money is investing in a diversified portfolio of stocks and bonds, which is likely the best option for most investors. Investing to double your money can be done safely over several years, but there's a greater risk of losing most or all your money when you're impatient.

37% of Americans can't afford an emergency expense over $400, according to Empower research | Empower.

What percent of Americans have 10k in savings? ›

For your longer-term goal of an emergency fund that will cover income shocks, aim to save $15,000 to $30,000 total.

The 50-30-20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should dedicate 20% to savings, leaving 30% to be spent on things you want but don't necessarily need.

Financial experts advise that you should have at least 3 to 6 months of living expenses in your safety net. Where you fall on that spectrum depends on a variety of factors such as your job stability, family size, how many earners are in your household, and how diversified your income is.

Most of us have seen the guideline: You should have three to six months of living expenses saved up in an emergency fund. For the average American household, that's $15,000 to $30,000¹ stashed in an easily accessible account.

Someone with minimal expenses will need to save less, while someone with more costly expenses should save more to prepare. Let's imagine you need $2,000 a month to cover your living expenses. With this number in mind, $25,000 would be more than enough to cover an entire year of expenses.