Here's the Average Emergency Savings Balance Among Americans. How Does Yours Compare?

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A 2023 SecureSave survey found that 63% of Americans could not cover an unplanned $500 expense. That tells us that many people lack emergency savings in a very big way.

New York Life's latest Wealth Watch survey findings align with SecureSave's. That data, which was released this past June, found that only 38% of U.S. adults report having an emergency fund. But among those who do, the average balance is $29,741.87.

But is having nearly $30,000 in a savings account for emergency fund purposes really necessary? And is that a sum you should be aiming for? The answer is, it depends.

Make sure you can cover three to six months of bills

Your emergency fund may be nowhere close to $29,741.87. But you also may not need that much cash in savings.

To calculate your emergency fund , figure out what your monthly expenses come to. Then multiply that number by anywhere from three to six. If your savings align with that number, you can rest assured that you're in pretty good shape -- even if you don't have $29,741.87 to your name.

Let's say you spend $3,000 a month on essential bills like your rent, car payments, groceries, and utilities. If you have $18,000 in your savings, that's a six-month emergency fund, which puts you in a great position to cope with unplanned expenses or a period of unemployment. So in that case, there's no need to stress about not having $29,741.87 because that's beyond what you need for financial protection based on your personal expenses.

Similarly, maybe you spend $8,000 a month on essential expenses because you live in a high-cost area, and you want a six-month emergency fund. If you have $29,741.87 in the bank, you're beyond the three-month emergency savings mark, which is good. But you'll need to save more to get to a six-month emergency fund.

Because of this, you shouldn't actually worry about what the typical emergency fund looks like. Instead, you should make sure that the amount of money you have in the bank is consistent with the amount you need.

Don't overfund your emergency savings

You might assume that if you have more money in your savings account than what you need for emergency fund purposes, then you're in even better shape. But that's not necessarily true. It's better to have more savings than not enough. But keeping too much cash in savings could mean losing out on better returns elsewhere.

Many savings accounts today are paying interest in the 4% range. That's pretty good, given that you don't risk losing your money like you do in a stock portfolio.

But you should know that the stock market's average annual return over the past 50 years has been 10%. So you're better off investing money you don't need for your emergency fund rather than letting it sit in savings.

Say you have $30,000 in your emergency fund when you only spend $4,000 a month on essential bills. Even if you want six months of coverage, that brings you to $24,000, so you've got an extra $6,000 on hand.

At a 4% in return, your $6,000 will grow into a little more $13,000 in the next 20 years (assuming your savings account keeps that high rate the whole time, which is unlikely). At a 10% return, you're looking at a little over $40,000.

So even if you have a large emergency fund balance -- one that's larger than the average -- don't assume you're all set. It's important to make sure you haven't saved too much for emergencies the same way it's important to make certain you've saved enough.

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