The average American should have $19,800 or more in savings, according to financial experts. This amount represents about three months’ worth of expenses for the typical household. In 2023, the average American family spent $6,440 per month, based on data from the Bureau of Labor Statistics.
With prices rising by 2.9% last year, the current average monthly spending is likely around $6,600. To have a sufficient emergency fund, families should aim to save at least three times this amount, or $19,800. Having an emergency fund is crucial for covering unexpected expenses or periods of unemployment.
Medical emergencies, car repairs, and home repairs can cost thousands of dollars. Without adequate savings, people may have to rely on high-interest credit cards, leading to long-term debt. Despite the importance of having substantial savings, many Americans fall short of this goal.
As of 2022, the median amount held in transaction accounts (including checking and savings) by American families was only $8,000, according to the Federal Reserve.
Emergency savings target for Americans
Building an emergency fund takes time and effort, but small steps can make a big difference.
Reviewing expenses and cutting unnecessary costs can free up money to save each month. Automatically transferring these funds into a high-yield savings account can help savings grow faster. For example, saving an extra $100 per month in an account with a 4.00% annual percentage yield (APY) can add up significantly over time.
Increasing income through side hustles or raises can also boost savings. Earning an additional $300 monthly and saving it at a 4.00% APY could result in $19,854 more in savings over five years. It’s important to note that $20,000 is not a one-size-fits-all number.
Individual financial situations vary, and some may need more or less in their emergency fund depending on factors such as health issues, homeownership, and income stability. In conclusion, aiming to save at least $19,800 – about three months’ worth of expenses for the average American family – is a smart financial goal. Having a solid emergency fund can provide a critical safety net and help avoid debt when unexpected costs arise.
