Here’s How Much Emergency Cash You Need Stashed I f an Emergency Happens
Here’s How Much Emergency Cash You Need Stashed If an Emergency Happens
Are you financially prepared for a national emergency?
By Jaime Catmull June 9, 2021
You've probably heard time and again that it's important to have a rainy-day fund set up "just in case" something unexpected were to happen. But we're now at a time when having an emergency fund is more vital than ever.
The coronavirus pandemic has already had devastating effects on the economy at large and, on an individual level, it has led to job loss and reduction of hours for many workers around the world. Even if the coronavirus' financial impacts haven't hit you personally, here's how to be prepared in case it does -- plus how to set up a fund for unexpected future national emergencies.
Why You Need a National Emergency Fund
Part of being prepared for any contingency, big or small, is having a reserve of emergency cash at your disposal at all times. When you can't rely on accessing your funds electronically, you'll need some legal tender to buy food, gas or other necessities.
"Whether it's Mother Nature or some other disaster out of your control, you always want to be prepared by having some emergency cash on hand," said Annalee Leonard, an investment advisor representative and president of Mainstay Financial Group. "Banks and ATMs may not be up and running for days after a strong storm. I recommend my clients have three to five days' worth of spending money, just in case."
How To Decide How Much To Save
To decide how much to save for an emergency fund, you'll need to ask yourself a couple of questions:
How much will I need for an extreme catastrophic event?
How much can I afford to save?
"It's wise to have a small amount of physical cash at home for the truest of emergencies when banks are not operating," said Priyanka Prakash, managing editor at Fit Small Business, a company that finds the best small-business software, services and financing options.
Aim To Save $2,000
"Individuals should be prepared to pay for essential or non-discretionary expenses out-of-pocket," said Brett Tharp, CFP and financial planning education consultant at eMoney Advisor. "Temporary lodging or shelter, fuel, food, water and necessary medications fall into this category. This will differ for each person depending on their level of preparedness or perception of how likely a catastrophic event might be."
Two-thousand dollars should cover those costs.
"The rule of thumb I advise my clients is to keep $1,000 to $2,000 in cash in case banking operations are shut down due to a national emergency or catastrophe," said Gregory Brinkman, president of Brinkman Financial in Tulsa, Oklahoma.
There's No 'Magic Number' for How Much To Save in Your Emergency Fund
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