Boost Your Financial Security: Why a Larger Emergency Fund is Crucial in 2024

Should you consider doing the same?

My emergency fund has come in handy in recent years, which is why I make sure to maintain money in a high-yield savings account that I don't touch unless unexpected expenses arise.

Keeping a lot of money in an emergency fund isn't very exciting, since it can't earn the generous returns that investments hopefully can. But despite already having a good amount of money in savings, one of my key financial goals for 2021 is to make my emergency fund even bigger. Here are two reasons why.

1. I expect coronavirus to continue to cause economic uncertainty

With coronavirus vaccines now being distributed throughout the U.S., it would be nice to believe the pandemic will come to an end. Unfortunately, I'm not very confident that will happen any time soon.

It will take time for people to be vaccinated, and there may not be enough people willing to get the shot to provide herd immunity. And because there's still a lot we don't know about COVID-19, there's a chance that new strains will make controlling the spread of the virus even harder.

All of that means there's a good chance the pandemic will continue to impact the economy in adverse ways. While my husband and I were both lucky not to see much of a change in income during the last lockdowns, there's no guarantee that won't change if the economy goes south again or the pandemic gets worse in unexpected ways.

Since I'm feeling less confident about the country's financial future -- and by extension our own -- I want to make my emergency fund a little bigger this year.

2. I have new financial obligations

In 2019, I had a baby, and that comes with a lot of new expenses. While I adjusted my emergency fund at the time, the costs of having a child are only growing (you'd be surprised how much a toddler eats).

Since I have new expenses, my existing emergency fund doesn't quite cover six months of living costs any more. And I want to make sure that I account for the new obligations I've committed to when deciding how large my savings account balance needs to be.

Should you adjust the size of your emergency fund?

If you're like me and have taken on new obligations or are concerned about the ongoing impact of COVID-19, you may want to pad your emergency fund too. In fact, even if coronavirus doesn't worry you, it's still a good idea to periodically review how much you have saved for a rainy day.

Getting complacent about your emergency savings could mean you end up with too little money when you really need it. So take the time at the start of the year to think about how well prepared you are if things go wrong. You may decide you have your own good reasons for stashing some extra cash in savings as you prepare for what 2021 will bring.