Here’s exactly how much Suze Orman and Dave Ramsey say you need to save right now (and psst: most of you are falling short)

Personal finance experts Suze Orman and Dave Ramsey both recently upped the amount of emergency savings they recommend you have.

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High-interest savings accounts are now paying significantly more than they did last year — see the best savings account rates you may get now here — and yet Americans tend to be significantly under-saved for emergencies. Indeed, 56% of Americans are unable to cover an unexpected $1,000 bill with savings, according to a survey of more than 1,000 adults conducted in 2022 by Bankrate.

But pros say you need months of expenses socked away in your emergency fund — a fact that’s become especially relevant as signs of a recession keep rearing their head. What’s more, both Suze Orman and Dave Ramsey recently upped the amount of emergency savings they now recommend you have.

Suze Orman: 12 months of expenses in an emergency fund

Finance guru Suze Orman now recommends that people have enough money to cover 12 months’ worth of expenses in an emergency fund, up from her previous eight months’ recommendation. “You know that my hope is that you work your way toward having enough set aside to cover 12 months of essential living costs. And you also know that I realize that can take time,” Orman says.

The reason for the hefty increase? Inflation. “Inflation is front and center wherever we turn. The cost of groceries, filling up the gas tank, and paying the utility bill are all a lot more expensive than they were a year ago,” Orman says. As a result of increased essential living costs, Orman says it’s a good idea to raise your emergency savings target.

Dave Ramsey: 6 months of expenses in an emergency fund

In spring 2022, personal finance expert Dave Ramsey said his general rule of thumb for emergency savings is now roughly six months of income. In his blog, he writes, “The more stable your income and household are, the less you need in your emergency fund. You should also aim for a six-month emergency fund if someone in your household has a chronic medical condition that requires frequent visits to a doctor or hospital.”

But ultimately, Ramsey says the only person who really knows how much you should have in savings is you. “You know your family (maybe a little too much sometimes) and your financial situation better than anyone. But before you can know how much you should have in savings, you have to figure out what you’re saving for first. To do that, you need to be intentional and have a plan with a goal — a savings goal,” says Ramsey.

What’s more, he says if you’re just getting started, you only need $1,000 in your starter emergency fund before you move on to the next step in his savings guide, which is to pay off all debt. “The only exception here is if your income is under $20,000 a year. If that’s the case, all you need is $500 in your emergency fund,” says Ramsey.

What other pros say about emergency savings

To calculate the amount of money you should have in emergency savings, you’ll need to consider several factors. Certified financial planner Bradley Nelson of Point Loma Advisors recommends looking at your actual expenses over a six-month period. “If you’re a large saver and have significant optional expenses you’re willing to give up immediately, you may be able to safely target a lower amount,” says Nelson.

If you have substantial pensions, annuities or Social Security these are relatively safe and Nelson says you may not need to set aside as much in cash equivalents. If you have a spouse or partner with income similar to yours, you may also be able to get away with setting aside a smaller amount. That said, Nelson says, “Don’t take the risk of targeting a lower amount of savings when times are good. Good times can evaporate in an instant and catch you flat-footed before you have time to react. Think Covid, think war, think natural disaster.”

To start, calculate your essential expenses, including anything you’d need to maintain in an emergency situation such as job loss. “This includes your housing, vehicle, other debts and money for basic food and activities. You don’t have to include discretionary costs such as vacations or fancy dinners out. In a financial emergency, those things should often be cut from your budget until circumstances change,” says certified financial planner Danielle Harrison of Harrison Financial Planning.

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