50% of Americans Are Saving More to Cope With Economic Uncertainty. Do Your Savings Need a Boost?

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Should you be working to boost your savings beyond a three-month emergency fund? Read on to find out. 

Many people are worried about a near-term recession, and understandably so. For one thing, financial experts keep warning of one. Also, the Federal Reserve’s interest rate hikes are likely to cause a pullback in consumer spending because borrowing has gotten so expensive. So it wouldn’t be totally shocking to see broad economic conditions decline during the latter part of 2023.

New data from Northwestern Mutual reveals that 26% of Americans cite a recession as their top concern. And 50% of Americans are taking steps to boost their savings account balances to cope with economic uncertainty. But should you be doing the same?

How much protection do you already have?

What makes the idea of a recession so scary is that it can go hand in hand with job loss. So a good way to mitigate your concerns is to have a solid emergency fund. If you have enough money in the bank to cover at least three months of essential expenses, you won’t have to worry as much about losing your job and not being able to pay your bills while you look for work.

If you’re wondering whether you need to be saving more to protect yourself and your family in the face of a recession, run the numbers to see if you have enough cash in the bank to cover three full months of essential bills. And to be clear, when we say “essential,” we’re talking about things like rent and mortgage payments, food, and utilities. If your emergency fund can’t cover your cable package or Netflix subscription, you can always cancel those things if need be. You can’t not have a home or skip eating.

Now, one thing you may find interesting is that according to Northwestern Mutual, the average American has $65,100 in savings. So if you’re sitting on that level of cash reserves, then chances are, it’s enough to cover three months of living expenses and then some.

But that $65,100 figure is probably so high because a small percentage of the population has a very large amount of money in savings. So if you have nowhere close to $65,100 in the bank, it doesn’t mean you’re not prepared for an emergency. But if you can’t cover three months of bills by tapping your savings, it means you need to do some work.

Should you save more than three months’ worth of bills?

A three-month emergency fund is really the minimum you should be aiming for. The more months of bills you can cover, the more peace of mind you get in the event of a layoff. And if you’re the sole breadwinner in your household, you may want to aim for six months of expenses in savings so you really don’t have to worry about landing in debt upon losing your job.

If you have, say, a three-month emergency fund right now, you don’t necessarily need to start slashing expenses to an extreme to go beyond that point. After all, you’re already in good shape. But it also wouldn’t hurt to spend more judiciously in the coming months to give your savings a boost.

All told, it’s encouraging to see that Americans are taking steps to boost their savings in light of recession fears rather than resigning themselves to unfortunate consequences. You may want to give your savings account a closer look and see what’s right for you — before economic conditions start to worsen and saving money gets even harder.

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