51% say an emergency fund is a higher financial priority post-pandemic

The coronavirus pandemic has changed a lot of things for Americans, including work, family life, and more.

It has also caused a lot of people to reconsider their personal finances.

Now, as the health crisis appears to be easing, 51% of Americans have said having an emergency fund is now a higher financial priority than before Covid, according to a survey by financial services website Personal Capital. The survey of more than 2,000 American adults was conducted online by The Harris Poll for Empower Retirement between March 23 and April 5.

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“I think the pandemic has really highlighted to a lot of people how important it is to have an emergency fund,” said Michelle Brownstein, certified financial planner and senior vice president of the private client group of Personal Capital. “I think a lot of people have been put in a very difficult financial situation, to put it mildly.”

How much to save

While everyone’s financial situation is different, experts recommend having at least a few months of living expenses, such as rent, utilities, and necessities, in an emergency savings fund.

“Our general rule of thumb is that you should have three months to six months of spending in cash savings at all times,” Brownstein said, adding that the exact amount is based on individual preferences.

For example, if you are in a two-earner household where both people have stable jobs, three months of savings may be enough. But if your situation is more volatile, like if you are self-employed or get most of your money from commissions, you might want to save more, she said.

“You have to decide how much risk you’re willing to take,” said Tania Brown, CFP and coach at SaverLife, a nonprofit focused on savings.

Ways to save

Of course, some people may find it difficult to save, especially if they took on debt during the pandemic.

The first thing people should do is make sure they have the basics, such as food, rent, and other necessities. Then they should plan to replenish their savings, although this will take some time.

“I might be slow, but it’s okay,” said Brown. She suggested families allocate any excess in their budget – even if it’s $ 5 a week or a month – just to get started.

“Start below what you think is comfortable – like, really easy – then slowly work your way up,” Brown said. Setting an achievable savings goal prepares you for success and helps you develop good saving habits.

For many, the goal of saving three months in spending seems overwhelming and may keep them from getting started, Brownstein said.

“To procrastinate only delays the arrival,” said Brownstein.

Another great way to start saving after the pandemic is to fight lifestyle drift, which increases your budget when you return to work or earn more money.

“It’s so tempting, once you have a job, to immediately go back to your old lifestyle,” Brown said. “But it’s a perfect opportunity to really build a solid financial foundation.”

By controlling your budget, you’ll have more money to spend on savings, she said.

And, any extra money should be put into savings immediately, she said. For example, families eligible for the new monthly child tax credit payments should use some of that money to replenish emergency funds once their needs are met.

Fortunately, many Americans seem to have made the necessary changes in order to save more for the future. Almost 40% said they spend less on non-essential items, including 46% of Gen Z respondents, 48% of Millennials and 47% of Gen Xers, according to the Personal Capital survey.

Additionally, 37% said they found out that after the pandemic they may be happy to spend less than they are used to and 35% said they could live less than they previously thought.

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