Emergency Savings: What's a Realistic Balance for American Workers?

Many or all of the products here are from our partners that pay us a commission. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.

Having funds set aside for emergencies is important. Here's how workers are doing.

You'll often hear that it's important to set money aside for unexpected expenses. You never know when your car might stop running or your home might need a major repair that your paycheck can't cover. Or you could lose your job and need to live off of your savings for a while.

As a general rule, it's best to keep three to six months' worth of living expenses in an emergency fund. But some working Americans may be falling short of that goal.

The median emergency fund balance among workers today is $5,000, according to the 21st Annual Transamerica Retirement Survey. Not surprisingly, emergency savings increase by age, with median balances coming in at:

• $2,000 for Gen Z workers
• $5,000 for millennial workers
• $6,000 for Gen Xers
• $10,000 for baby boomers

But while a median emergency fund balance of $5,000 is better than nothing, it's probably not enough to offer the protection most workers need. As of last year, the average American household spent $5,102 a month. As such, $5,000 in savings would only be enough to cover about a month of bills -- not close to three months' worth, which is the minimum people should be saving for emergencies.

If your emergency fund could use some work, here are some steps you can take to beef it up.

1. Get on a budget

Having a budget will make you more aware of what your expenses cost you. It will also help you spend more judiciously. The less you spend on a monthly basis, the more money you'll be able to sneak into your emergency fund. It pays to look at different budgeting apps that could help you get started.

2. Give up one luxury

There are probably expenses you pay for that you can technically live without, whether it's one of your takeout orders each week, your gym membership, or the three different streaming services that keep you entertained. Start by cutting out one luxury and stick that money into savings. You can reintroduce that expense once your emergency fund starts looking healthier.

3. Get a side hustle

There are a host of side hustles you can choose from today that will help you boost your income. And since that money won't be earmarked for existing bills, you'll have the option to sock it away in the bank instead. You can choose your side gig based on your skills, hobbies, and schedule. If you love animals, for example, you can moonlight as a dog walker or pet sitter. And if you want the flexibility to set your own hours, you can sign up to drive for a ride-sharing service.

Without a robust enough emergency fund, you could be forced to rack up debt when unplanned expenses strike or if you lose your job unexpectedly. If your savings balance is comparable to that of the typical American, rest assured that you're not in terrible shape. After all, some people have no emergency savings at all. At the same time, it does pay to look at ways to bulk up your emergency fund and buy yourself the protection you deserve.

Top credit card wipes out interest into 2023

If you have credit card debt, transferring it to this top balance transfer card secures you a 0% intro APR into 2023! Plus, you’ll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read The Ascent's full review for free and apply in just 2 minutes.