For a growing number of workers, job loss anxiety is gaining steam.
According to a new survey by the Federal Reserve Bank of New York, Americans who are worried about the job market hit levels on par with the pandemic.
Unemployment expectations — whether people think the unemployment rate will pop up a year from now — jumped 4.6 percentage points to 44%, the highest reading since April 2020. The increase was spread across age, education, and income groups.
It’s hard not to feel shaky given the chatter about a recession looming, inflation taking off again, and the daily roster of thousands of layoffs in the federal workforce and large companies.
Instead of sitting around worrying, use that fear to get as financially fit as you can right now.
One way is to turbocharge your emergency savings fund.
Pay yourself in peace of mind
“Consumers are anxious about higher inflation and household expenses as well as lower wage growth combined with worsening job security across all income levels,” Sid Pailla, chief executive of the Sunny Day Fund, a financial technology company that helps workers establish emergency funds, told Yahoo Finance. “It’s no surprise that we’re seeing emergency savings now top of mind as folks prepare for a potential financial blow.”
Having cash on hand to cover living expenses for a few months, even if you don’t experience a financial jolt, helps you stay cool and calm when the economy feels rocky.
“With many people worried about job security, it’s not just about preparing for the unexpected — it’s about giving people the peace of mind they can weather the storm,” Liz Davidson, CEO and founder of Financial Finesse, told Yahoo Finance. “If they lose their job or face an unexpected expense, having savings to fall back on can make all the difference.”
Automate, automate
Successful saving is all about habit, and that starts with setting up an automatic direct deposit from your paycheck into a dedicated high-yield savings account.
“The key is to start small and stay consistent,” Davidson said. “Setting aside a little bit each paycheck can add up over time. Starting with a goal like saving $500 or $1,000 is a great way to begin, and once that’s achieved, you can keep going.”
One thing I can attest to is setting aside money before you even see it.
“This way, you’re saving without thinking about it,” Davidson said.
The ideal amount to have set aside in an emergency savings account is roughly a year’s worth of expenses, but if that sounds daunting start with a goal of four months.
“You can always build it up,” said Greg McBride, chief financial analyst at Bankrate. “Start the habit.”
Track spending
It’s also a great time to track your spending.
“This does two things,” McBride said. “It opens your eyes to where your money’s going, so you can identify areas to cut back. And you might also identify a list of expenses that is your ‘in case of emergency break glass list.’ That is the list of expenses that you would cut back or eliminate if you did get a layoff.”
How employers are helping boost emergency accounts
You may be able to pull up to $1,000 annually from a retirement account for specific emergency needs without owing the 10% early distribution penalty, thanks to new federal rules.
And if you agree to pay it back within three years, you might not face a tax bill on the sum either. That’s providing the withdrawal can be tagged to a personal or family emergency.
Meanwhile, employers are now able to offer their employees the option of putting money into an emergency fund that is paired with their retirement plan. Employees can save up to $2,500 in the emergency fund, and it’s accessible anytime.
That doesn’t mean they’ve rushed to do so, but it’s starting.
“We are now observing a big bump of interest among workers to save,” Pailla said. “In turn, they’re pushing their employers to help them.”
Alas, change comes slowly.
“The very first of these emergency savings accounts is still in development, as a variety of quirks in the law raised administrative obstacles to implementation,” Emerson Sprick, associate director of the Economic Policy Program at the Bipartisan Policy Center, told Yahoo Finance.
“Hopefully, the rollout of that first plan later this year will pave the way to broader uptake by recordkeepers and plan sponsors,” he added.