There’s never a bad time to have an emergency fund, but this might be a particularly good time to boost your reserves. While the American economy keeps chugging along, there are some cracks showing amid all the good news — particularly when it comes to jobs. Although the September jobs report did show a higher increase in jobs than expected, for the year, employers in the U.S. have announced the most job cuts since the pandemic year of 2020, per a report from Challenger, Gray & Christmas.
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While this may or may not affect you directly, the best time to build an emergency fund is before you need it. Here’s a look at some of the reasons you might want to boost your contributions now, and how you can go about doing it.
For the Year, Job Cuts Are Way Up
According to the recent report by Challenger, Gray & Christmas, layoffs have reached nearly 1.1 million through October 2025. That marks a 44% increase from all 2024 job cuts. In addition to the increase in layoffs, employers on the whole expect to hire 35% fewer workers for the remainder of the year compared with one year ago.
When you put these data points together, it’s hard to argue that the labor market is booming. If these trends continue, more and more Americans could be at risk of finding themselves unemployed. This is exactly the type of scenario in which you’ll want to have a sizable emergency fund.
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An Emergency Fund Works Only When It’s Built in Advance
When things are going well, it’s easy to think of an emergency fund as a waste. After all, that money just sits in an account, seemingly doing nothing, when you could be spending it on things you need or want. But an emergency fund works the same way as an insurance policy — you hope you never need it, but you’re grateful that it’s there if you do.
If you wait to build your emergency fund until you actually have a financial problem, it’s already too late. The money you now need won’t be there for you. It’s when times are good that you should be preparing for a future in which you encounter some bad luck.
With layoffs at their highest level in years and employers slowing their hiring, there are some definite cracks in the labor market. The rise of artificial intelligence is also a threat to workers who previously felt secure in their jobs. In this type of environment, building an emergency fund should be a priority for everyone. If nothing else, it builds you some time and flexibility in the event you get laid off. With the freedom to take extra time to decide your next career move, you’re more likely to pick something that’s the right fit rather than just taking the first available job out of desperation.
Inflation and Other Economic Numbers Are Still Concerning
Even though the economy has remained stubbornly strong, inflation and interest rates remain elevated. These added costs squeeze the budgets of both companies and workers, and eventually they could reach a breaking point. Toss in global uncertainty and political unrest, and perhaps it’s not surprising that companies are hitting the brakes on their hiring plans.
While trends could reverse, all of these indicators are red flags that if nothing else make for an uncertain near-term future for Americans. Having a bigger emergency fund is a prudent step.
Practical Actions You Can Take Now
For those who are looking to build or boost an emergency fund but aren’t exactly sure what to do, here are some steps to follow.
- Calculate your current, actual monthly expenses. This will provide you with a basis for computing how much you should add to your emergency fund.
- Determine how much of a buffer you need. If you’re an expert in your field and work in a stable industry, the traditional advice of three to six months’ worth of income might be sufficient for your emergency fund. But if you’re in a more volatile field, you might want to accumulate up to a year’s worth of income.
- Automate your transfers. Setting up auto-transfers from your bank to your emergency fund will protect you from forgetting to make regular deposits.
- Keep your money in a high-yield savings account. These accounts offer easy access to your funds, pay a relatively high rate of interest and come with Federal Deposit Insurance Corporation insurance.
A Reminder, Not a Warning
While some economists are still calling for recession, those predictions have been heard for years. Meanwhile, the S&P 500 has posted back-to-back years of 20%-plus gains, with double-digit gains for 2025 still well in hand.
While certain economic signs suggest that you may want to boost your emergency fund, it doesn’t mean that the future is all doom and gloom. Instead of thinking of an emergency fund as a desperate measure, view it instead as an insurance policy that gives you flexibility and optionality in case things do turn sour.
And if you never end up needing it? That’s actually cause to celebrate, as it’s a sign that things are going well for you.
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This article originally appeared on GOBankingRates.com: Why Now Might Be a Good Time To Boost Your Emergency Fund
