Once you have $2,467 in savings, you're less likely to experience hardship, the research shows -- and any additional money saved doesn't lower the odds any further.
Financial advisers have long recommended that people keep up to six months’ worth of emergency savings in case of an unexpected medical bill or job loss. They crunched the numbers on more than 70,000 lower-income households, and they’ve come up with what may be the magic number for emergency savings accounts: $2,467.
“[O]nce you have at least $2,467 stored away for a rainy day, your probability of experiencing hardship in the next six months is low, and saving an additional dollar doesn’t seem to help reduce that probability very much,” Gallagher told MarketWatch. Of course, $2,500 does not protect you from all risks, but that once you’ve hit that figure, each additional dollar offers rapidly diminishing returns based on the statistical likelihood of you needing it. That sum, she added, was equal to about one month’s salary for people in their sample.
The median household savings in the group was just $70. A quarter had no savings at all. And just over a third reported experiencing hardship, defined as skipping medicine, not being able to pay utility bills or rent, or cutting back on food due to a cash crunch.
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