Should You Give Your Emergency Fund a Checkup This Summer? Here's What Suze Orman Says

It may be time to give your savings a closer look.

If you've been paying attention to your credit card bills, you may have noticed that they're higher than ever due to soaring gas prices and grocery costs. We can thank inflation for that.

The cost of many household essentials is considerably higher right now than it was a year ago. And while inflation levels dipped slightly in July compared to June, we could still be in for many more months of sky-high expenses.

That's why it may be time to rethink your emergency fund. In fact, financial guru Suze Orman insists that it's a great time to give your savings account a checkup -- and add money to it as needed.

Get a new estimate of your monthly bills

As a general rule, it's a good idea to have an emergency fund with enough cash to cover three to six months of living expenses. In fact, Orman has actually said in recent months that having up to 12 months' worth of expenses in the bank is a smart bet.

Now the purpose of an emergency fund is to be able to cover unplanned expenses so you don't land in credit card debt the moment an unexpected bill pops up. Your emergency fund could also get you through a period of unemployment. In fact, that's why emergency fund calculations are often based on monthly expenses, as opposed to a random number, like $5,000. You want to make sure you can cover your personal bills for several months in case your job disappears.

Meanwhile, because inflation is rampant, your monthly expenses may be higher now than they were when you first put your emergency fund together. And that's why Orman says that now's a good time to reassess your savings and make sure you really have enough cash on hand.

It may be that when you calculated your emergency fund needs, you found that you were spending $3,000 a month on essentials, and so you socked away $9,000 to make sure you could pay your bills for three months in the absence of a paycheck. Well, if your essential bills are now costing you $3,300 a month and you only have $9,000 in savings, you're actually short of that three-month goal. So in that case, you'd want to do what you can to add another $900 to your savings.

Another reason now's a good time to check up on your savings? We don't know if a recession will hit in the near term, but some financial experts think we could be in for a period of economic decline. And so you'll want a solid emergency fund to get ahead of that situation.

Don't wait

The money you have as your safety net may not be as adequate as you think it is. And you don't want to learn that the hard way by getting laid off and not having enough savings to sustain yourself for a reasonable period of time while you look for work.

As such, it pays to take Orman's advice and give your emergency fund a checkup this summer. Boosting your savings could spare you a world of financial pain and regret if your situation worsens.