35% of Americans Don't Think They Have Enough Emergency Savings. Do You?

Are you all set on the savings front?

Having an emergency fund is an essential part of being financially secure. Without one, you might immediately land in debt if an unplanned bill comes your way that can't be put off, or if you were to lose your job and struggle to pay your bills on unemployment benefits alone.

In a recent New York Life survey, many Americans revealed that they're kicking off the new year with less confidence in their finances than before. Not surprisingly, 35% attribute that to not being confident in their emergency fund balances. If you feel similarly, it's important to ramp up your savings -- before a situation arises where you need to tap your reserves.

How much money does your emergency fund need?

As a general rule, your emergency fund should contain enough cash to cover three to six months of essential living costs. That doesn't mean you need enough money to pay for things like cable, restaurant meals, and trips during those three to six months. Rather, you need enough to cover your essential expenses, like your rent or mortgage payment, transportation costs, food, medications, and utilities.

So, let's assume you spend $2,500 a month on essentials and another $500 a month on leisure items like outings with friends, store-bought coffees, and a variety of streaming services. If you manage to sock away $7,500 in the bank, you're in good shape as far as your emergency fund goes because you'll have enough money on hand to cover three months of unavoidable bills.

That said, for better protection, you may want to aim for six months' worth of essential bills, or $15,000. This especially applies if you're the sole breadwinner in a household with multiple dependents, or if you're self-employed and therefore generally aren't eligible for unemployment benefits.

How to boost your emergency savings

If you're lacking in emergency savings, a few savvy moves on your part could help you build more cash reserves relatively quickly. First, remember those non-essential expenses we just talked about? Cutting back on them temporarily could free up more cash for you to stick in your savings account.

This isn't to say that you shouldn't spend a dime on entertainment until your emergency fund is complete. Rather, scale back in a reasonable fashion. If you usually spend $500 on leisure every month, cut back to $250.

At the same time, consider getting yourself a side gig to boost your income. Since your earnings from that job won't be allocated to existing bills, you can take that cash and use it to pad your savings. Just don't forget to earmark some of your side wages for taxes if they aren't taken out of your pay from the start.

It's hard to feel confident about your finances if your emergency savings isn't up to par. If that's the situation you're in, take comfort in the fact you're in good company. But also, take steps to boost your savings as quickly as possible so you get the protection and peace of mind you deserve.