Oct 5, 2025
Despite the vast majority (75%) of Americans saying emergency savings are essential to financial security, one-third (32%) have no emergency savings set aside, according to a June survey by Empower. (1)
That’s a huge increase from last year, when the financial services company published an April survey showing 21% of Americans had no emergency savings. (2)
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High living costs may be forcing Americans to squeeze their budgets, leaving less room for savings. The current state of affairs has left half of survey respondents stressed about how much money they have set aside to handle an unexpected expense.
It’s difficult to understate the importance of emergency savings. Here’s why, plus how you can begin to protect yourself by building your own fund.
Risks of living without emergency savings
Around 29% of Americans cannot afford an unexpected expense of over $400, Empower’s research shows. For those people, it means a single plumbing repair bill or minor medical expense could derail their finances and push them into debt.
Let’s say you suddenly lose your job and only have a few hundred dollars to spend, you could struggle to pay next month’s rent or even afford to eat. That’s why many experts recommend having three to six months’ worth of expenses in your emergency fund if possible. After all, according to the Bureau of Labor Statistics, the average duration of unemployment as of August was just shy of six months.
When faced with a job loss or major unexpected expense, many are tempted to dig into their retirement savings prematurely. A survey by the Transamerica Institute found that 37% of workers have taken a loan, hardship withdrawal and/or early withdrawal from their 401(k) or IRA account. (3)
While this might solve an immediate cash crunch, early withdrawals typically come with a 10% tax penalty if you’re under the age of 59.5. Additionally, withdrawing funds early cuts your portfolio's growth potential.
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How to start building emergency savings
A robust emergency fund can act like a moat for your finances, but saving money is often easier said than done.
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If you find yourself struggling to save, start with a complete audit of your income and expenses. Account for every penny, and look for ways you can potentially cut back on your spending. If you can identify anything you can cut back on — such as eating fewer take-out meals or getting rid of streaming services you hardly use — you can redirect those funds toward your savings goals.
Of course, cutting out discretionary purchases offers a way to find savings, but if you want to see big results, you might need to dig deeper.
Take a close look at three of the major spending categories for Americans: housing, transportation and food. If you can make cuts to these big areas, you can potentially free up significant room to save more. For example, if you can find a more affordable apartment or opt to trade your car for a more affordable ride, you could redirect significant money toward your savings.
If possible, set a savings goal and stick to it. Starting small is often a good idea. But at some point, you might realize that you have an income problem, not a spending problem. In that case, you might want to dedicate time toward working more shifts, finding a new job or picking up a side hustle. Any extra cash you earn can help your savings grow.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Empower (1, 2); Transamerica Institute (3)
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Sarah Sharkey is a personal finance writer who enjoys helping people make optimal financial decisions for their situation. She loves digging into the nitty-gritty details of financial products and money management strategies to root out the good, the bad, and the ugly. Her goal is to help readers find the best course of action for their needs.
