Emergency Savings: How Much Do I Need?

Prior to the Covid-19 pandemic, approximately 30-50% of adults in the United States (depending on the study) would struggle when faced with an unexpected or emergency expense. While the percentage of affected adults improved with the arrival of COVID relief programs, recent data shows that the numbers may be trending back down toward pre-pandemic levels. The aggregate data will continue to show these fluctuations over time depending on the macroeconomy, significant policy changes, etc., so a more immediate question for consumers is:  How much do I need in my emergency savings account? $400…$1,000…3-6 months of expenses? The answer is not concrete and completely depends on your own personal situation, but here are some things to consider:

  1. How large is your household? – the necessary living expenses for a single individual will likely look much different than a household of four.
  2. Do you own a home or rent? – homeowners face the risk of repair costs, which increases their need for emergency savings. The recent derechos are a perfect example.
  3. What are your insurance deductibles? – this is an often-overlooked aspect of emergency savings. Auto insurance deductibles tend to be around $250 or $500, while health insurance and homeowner’s insurance deductibles could be in the thousands. A higher deductible provides lower premium costs, but does increase your need for emergency savings.
  4. How stable is your income? – are you self-employed or an independent contractor? Do you work in a high-turnover industry or face occasional government shutdowns? How likely you are to need those savings to make up for lost income should also factor into the amount saved.

This is not meant to be an exhaustive list, but rather a starting point for your emergency savings plan. For the DIY-ers, I encourage you to utilize PowerPay, Utah State University Extension’s free, online, personal finance tool to create your emergency savings plan; otherwise, you can contact your local Iowa State University Extension and Outreach Financial Educator for a free, confidential, 1:1 Financial Consultation!

Ryan Stuart

Ryan is a Human Sciences Specialist in Family Wellbeing and an Accredited Financial Counselor®. He focuses on educating and empowering all Iowans to independently make positive financial decisions throughout their life course.

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Tips for Wise Credit Use

When you need credit, you need to make sure you get the best deal you can.  Here are some tips:

  • Shop around for the best offer and interest rate. Higher interest rate means more money out of your pocket.
  • Think of credit as the use of future income.  You need future income to buy things on credit.
  • Don’t get a credit card just because they’re giving something away. If you are new to using credit, this can be very harmful to you.  Think before you sign up for an offer.
  • Pay bills on time, so you won’t have to pay late fees or jeopardize your credit history. Currently, 35% of your credit score is determined by how you have paid your bills in the past.
  • Pay bills in full each month, so you won’t have to pay finance charges.
  • Pay more than the minimum amount due. Debts will be paid off sooner, and you’ll save money. Credit card companies require you to pay around 4% of the total bill. This means you are usually not paying much on principal.  A software program https://Powerpay.org can help you see how much you are actually paying on each debt.
  • Know how much debt you can handle. Payments shouldn’t be more than 15% of your monthly take-home pay (excluding your mortgage).
  • Get a free copy of your credit report once a year and make sure it’s accurate. . .  To request a copy choose one of the following methods:

By phone – Call Toll Free Number – 877-322-8228

Copies of the form are available at www.ftc.gov/credit

Information you need when making the request: your social security number, date of birth, and address if you have moved within the last two years.  Each of the three nationwide reporting companies may request information only you would know to maintain the security of your file.


Susan Taylor

Resources are important whether you are looking to rent your first apartment, pay your bills, buy your first home or send your child to college. There are many ways to save money to reach your goals, and hopefully ISU Money Tip$ will be one of them. I enjoy traveling, needlework and am a novice gardener.

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