Nearly half of Americans are worried about higher unemployment rates, according to data from the New York Federal Reserve. Yahoo Finance Senior Columnist Kerry Hannon joins Wealth with Brad Smith to discuss how to boost your emergency savings to prepare for potential job losses.
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According to the New York Fed, the share of Americans who are concerned about unemployment risk is at the highest level since the pandemic. Nearly half of people surveyed expect unemployment to be higher a year from now. Here with some of the tips for those workers, we've got Yahoo Finances' own Kerry Hannon. Kerry, what are some ways to shore up your emergency fund for uncertainty?
Yeah, that's right, Brad. I mean, this is a perfect time. If you're worried about your job, but you still have an income steady coming in at the moment, this is your time to get financially fit. And you really need to turbocharge that emergency fund. Um, it's important to take a look at it. And if you, the easiest way to do it is to really make a habit out of saving, because cash, if you have cash on hand, it's going to make you feel a little more comfortable dealing with any upheavals. So if you can automate this habit of saving from your checking account to a high yield savings account, when you don't even see the money go out, it is the best way to get started. It creates that habit and start that. Now, ideally, you know, you want to have a year's worth of living expenses set aside if you were going to face a job loss. But start at four months. That's a big daunting number. So start small and let it build up. This is important to do also. I think this is a great time while you're building up that savings account, um, is to start looking at, how am I spending my money? Are there places, if you start tracking your saving each month, or you're spending each month, you have a sense of where you can get lean and mean. And this will really help you get financially fit to prepare for any sort of rough, rough road ahead.
Are there any ways that your employer can help you save?
Yeah, interestingly enough, Brad, what's happening is many retirement plans will allow you to withdraw money from your 401k plan or employer provided plan up to, say, $1,000, I think it is. And if you agree to pay it back and do pay it back within a certain period of time, you don't pay tax on that or the penalty. So that can be a good Band-Aid for many people. The second thing is, employers are also starting to implement a way that you can automatically save in an emergency fund like you do your retirement account from your paycheck. So they'll automatically put it into an emergency savings account for you, up to maybe $2,500 is what the number I've heard is. Now, many plans haven't started doing this, but we do expect there's lots of little niggles they have to work out, but we should see more of this rolling out this year.
