KEY POINTS

• More than half of Americans don’t have an emergency fund, and 40% of those who do have less than $10,000, according to a recent CNBC/Momentive survey.
• While experts often suggest keeping enough cash to cover three to six months’ worth of living expenses, the right amount may depend on your household and occupation.

An emergency fund is a key piece of your financial plan, especially amid economic uncertainty. But the right amount of cash depends on your household and occupation, according to financial experts.

Most Americans aren’t prepared for a financial emergency, according to a recent CNBC/Momentive survey of more than 4,000 U.S. adults. More than half of Americans don’t have an emergency fund, and 40% of those who do have less than $10,000, the findings show.

While experts often suggest keeping enough cash to cover three to six months’ worth of living expenses, others have a more nuanced approach.

“Rules of thumb overlook a number of important factors,” said certified financial planner Andy Baxley at The Planning Center in Chicago.

“The volatility of the sector you work in, the stability and predictability of your income streams, and whether or not you are self-employed are just a few examples,” he said.

Consider your job security

Sufficient emergency savings depends on how long it may take to replace your current income after a job loss, according to Niv Persaud, a CFP and managing director at Transition Planning & Guidance in Atlanta.

Despite threats of a recession, the labor market has remained strong with the unemployment rate at 3.4% in April, tied for the lowest level since 1969. While sectors like tech, financial companies, health care, and retail have been hit with layoffs in 2023, that doesn’t mean workers are scrambling for jobs.

Some 55% of workers who were laid off in December or January found new jobs by the end of January, according to a ZipRecruiter survey. On average, it took workers seven weeks to find a new job, with employees in advertising and marketing, the automotive industry, and technology most likely to already have found a new position.

Still, “the job search process is longer for higher-income individuals,” said Persaud, who urges clients to keep nine months of emergency reserves — including rent or mortgage, utilities, food, and other necessary costs — for dual-income households and one year of expenses for single-income families.

Kevin Brady, a CFP and vice president at Wealthspire Advisors in New York, also considers his clients’ job security, aiming for three months of expenses for a two-income household with secure jobs, or six months of expenses for a one-income family with a secure job. However, a one-income household with “highly variable pay” may aim for nine months of emergency savings, he said.

Add a buffer for highly correlated income

Dual earners may also consider the degree of correlation between each partner’s income. “If you both work in tech sales, the likelihood of you both losing your jobs at the same time is higher than if, say, one of you were a professor,” Baxley said. When income is highly correlated, he typically recommends a larger emergency fund.

Of course, the right number may also hinge on personal preference. “If some calculator says you should have $20,000 in emergency reserves but you won’t sleep at night with anything under $40,000, then $40,000 is probably the right number.”