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Do I Need to Boost My Emergency Fund?

With inflation soaring and economists warning of a possible recession, find out whether you need to adjust your saving plan and boost your emergency fund.

August 29, 2022

An emergency fund is an essential part of financial planning. Unexpected financial bills or emergencies can arise at any time, whether it's a job loss, an illness or a sudden need for home and car repairs. Having a decent amount of savings accumulated means that when life throws one of its inevitable curveballs your way, you’ll be able to manage without slipping into debt and getting into major financial trouble.

In today’s uncertain economic climate and with the threat of arecession looming, it’s more crucial than ever to have anemergency fund. But what is a recession and how do you know whether what you’ve saved up is enough? Do you need to adjust your saving plan and boost your emergency fund? Here’s how to figure it out.

Do you need to boost your emergency fund?

According to asurvey from Bankrate, high inflation is making Americans nervous about their emergency savings. Statistics show that the percentage of people who are uncomfortable with the money they’ve set aside is now 58%, up from 44% two years ago.

If you’re wondering whether your emergency fund is enough to see you through tough times, here are three questions to help you assess your situation and decide whether you need to boost your savings.

How much do you currently have saved up?

The first thing you need to do to determine whether you need to boost your emergency fund is to note how much you already have saved up. Though the amount to save depends on your situation, financial experts generally recommend having three to six months of normal living expenses in your emergency fund. So, if your critical monthly expenses, e.g., housing, food, transportation and credit card payments are $3,000, you should ideally have between $9,000 and $18,000 saved up.

If your current emergency savings are below the recommended threshold, there is a good chance you could find yourself vulnerable in the event of an unexpected financial expense or emergency. Consequently, it might be a good idea to start taking action to boost your fund.

How stable is your job?

Your job stability will also play a big role in whether you need to alter your saving plan and boost your emergency fund.

On the one hand, if you have a relatively stable job with good health insurance or if you have the reputation or skills to quickly find other work, chances of needing your emergency savings to cover your expenses for an extended period of time are low. A cash reserve of three months' living expenses may be adequate.

On the other hand, if you're self-employed or work in a field where layoffs are common during economic downturns and are the sole wage earner in your family, increasing your emergency fund is a good idea. A good amount to aim for in this scenario is at least a year's worth of living expenses. If your current emergency fund can’t cover your living expenses for a year, it's a good idea to start adding to it.

Have your expenses increased?

An emergency fund should, ideally, be able to cover several months of living expenses in the event that you are not earning income. An increase in your total monthly expenditure means that you probably need a bigger emergency fund.

In the last two years, for example, many people have seen their expenses rise due to a higher cost of living and high inflation.

To establish whether you need to boost your emergency fund, compare how much you were spending each month before with what you are spending now. If the difference is considerable, start planning to boost your emergency fund.

Should I keep all my emergency savings liquid?

Your emergency fund should be liquid — easily accessible — so that you can get it when you need it, which is the reason for having one. Some of thetop options for keeping your emergency fund include:

  • Savings account

  • Checking account

  • Money market account

  • Cash

Putting your emergency savings in assets like gold or real estate or in volatile instruments like stocks and mutual funds is not recommended. If you have an emergency and need money quickly, you’ll have to sell your assets at whatever value they are at the time. Depending on market conditions, it is possible that you might have to sell at a loss.

Furthermore, you may have to wait up to a week for the bank or investment firm to release the funds, which may be too late for your financial needs.

How to save more for your emergency fund

Here are a few ways to find extra money to boost your emergency fund.

Create a budget

One great way to find money to boost your emergency fund is to follow a savings plan or a budget that is designed around your income. 

Start by tracking your expenses for a month. This will help you see where your money is going and whether there are areas where you are perhaps overspending or where you can make cuts. Online apps and budget tools such as and You Need a Budget can help with this process.

The next step is to create a plan for how to spend your money each month going forward. Your ultimate goal should be to widen the gap between your income and expenses as much as possible. The money left over after your expenses can then be put into your emergency fund to boost it. 

If you lack discipline, you can automate the process by setting up an automatic transfer of a portion of your paycheck into your emergency savings or checking account.

Stash your windfalls

It's always a nice feeling when you come into a windfall, whether it's an inheritance, a work bonus or a tax refund. And while it can be tempting to splurge the money on something fun like a vacation, a wiser move would be to use it to boost your emergency fund.

Find a side hustle

Is there something you enjoy doing or making and receive regular compliments on? You might consider turning it into a side hustle to generate some additional income. It could be driving for a ride-sharing service such as Uber, doing some freelance writing, selling handmade items online, babysitting or pet sitting.

Whatever it is, a side hustle can provide some extra income that you can use to pad your emergency fund. In addition, a side hustle can act as an additional income stream if you're laid off from your regular job.


Have old electronics, clothes, shoes, baseball cards, or other items of value that you don’t use or need any more? Decluttering can not only help you clear some space in your home, but it can also bring extra funds that you can use to beef up your emergency fund. You could have a garage sale, rent a space at a flea market or even use an online auction site like eBay to sell vintage or unused items and earn some cash.

Wrapping up

Boosting your emergency fund can help make sure that you have a sufficient cushion to fall back on when unexpected expenses or financial shocks happen. Use the tips given here to determine whether you need to boost your current savings and then take action.

Needless to say, your emergency fund should be used only for emergencies. A night out with friends, a beach vacation or buying the latest electronic device don’t count as true emergencies and should not be a reason to dip into your emergency fund. If you happen to withdraw money from your emergency fund, replenishing it as soon as possible is the best way to cover the next pressing financial need.

In the meantime, if you are looking for a way to free up some extra money from your budget to boost your emergency fund,Tally✝ might be able to help. Tally is a debt management app that offers an easy way to consolidate your high-interest credit card debt into one low-interest loan, saving you money. 

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