How Much Should Be in Your Emergency Fund (By Age!)

In this episode of the Personal Finance Podcast, we are going to talk about  how much should be in your emergency fund by age? Watch this episode on Youtube How Andrew Can Help You: Listen to The Business Show here. Don't let another year pass by without making significant strides toward your dreams. "Master Your Money Goals" is your pathway to a future where your aspirations are not just wishes but realities. Enroll now and make this year count! Join The Master Money Newsletter where you will become smarter with your money in 5 minutes or less per week Here! Learn to invest by joining Index Fund Pro! This is Andrew’s course teaching you how to invest! Watch The Master Money Youtube Channel! , Ask Andrew a question on Instagram or TikTok. Learn how to get out of Debt by joining our Free Course Leave Feedback or Episode Requests here. Car buying Calculator here Thanks to Our Amazing Sponsors for supporting The Personal Finance Podcast. Shopify: Shopify makes it so easy to sell. Sign up for a one-dollar-per-month trial period at shopify.com/pfp Chime: Start your credit journey with Chime. Sign-up takes only two minutes and doesn’t affect your credit score. Get started at chime.com/ Thanks to Fundrise for Sponsoring the show! Invest in real estate going to fundrise.com/pfp Thanks to Policy Genius for Sponsoring the show! Go to policygenius.com to get your free life insurance quote. Indeed: Start hiring NOW with a SEVENTY-FIVE DOLLAR SPONSORED JOB CREDIT to upgrade your job post at Indeed.com/personalfinance Shop Data Plans and Save Big at mintmobile.com/pfp Go to https://joindeleteme.com/PFP20/ for 20% off! Links Mentioned in This Episode: How to Invest In Yourself and Earn More (THIS YEAR!) How I would Invest Large Sums of Cash - Money Q&A Pay Off Debt or Keep Investing? (Money Q&A) The 1-3-6 Method For Building & Managing Your Emergency Fund The Insurance You MUST HAVE and What You Don't Need Connect With Andrew on Social Media: Instagram TikTok Twitter Master Money Website Master Money Youtube Channel Free Guides: The Stairway to Wealth: The Order of Operations for your Money How to Negotiate Your Salary The 75 Day Money Challenge Get out Of Debt Fast Take the Money Personality Quiz Learn more about your ad choices. Visit megaphone.fm/adchoices

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• 0:00Andrew Giancola?

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• 0:44Andrew Giancola?

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• 1:27Andrew Giancola?

  I told it what kind of website I wanted, and I built the first version in minutes. No coding, no designer or developer needed. And Hostinger doesn't stop at launch. Their AI can help with SEO, website copy, email marketing, and more. Plus, your domain, website, email, and marketing can all live in one account, with plans starting at just $3 every single month. Hostinger builds your vision step by step. Create your website today. Go to hostinger.com/pfp and use code PFP for 10% off now. On this episode of the Personal Finance Podcast, how much should be in your emergency fund by age?

• 2:25Andrew Giancola?

  What's up everybody and welcome to the Personal Finance Podcast. I'm your host Andrew, founder of MasterMoney.co. And today on the Personal Finance Podcast, we're going to be talking through how much should be in your emergency fund by age. If you guys have any questions, make sure you join the Master Money Newsletter by going to MasterMoney.co/newsletter. And don't forget to follow us on Apple Podcasts, Spotify, YouTube, or whatever your favorite podcast player is. And if you're getting value out of the show, consider leaving a five-star rating and review on Apple Podcasts, Spotify, or your favorite podcast player. Now, today, we're going to be diving into how much of your emergency fund you should be saving by age, because as we age and as we go on within our lives, our emergency

• 3:09Andrew Giancola?

  fund needs are going to dramatically change. Now, our lifestyle is going to make our emergency fund needs change, whereas, you know, as you get older, maybe you're having kids, maybe you're buying a house, maybe you're doing all these different things. And so, the amount of cash that you have on hand to protect you against life is going to be very, very important. So, for those who don't know what an emergency fund is, let's get down to the core basics here. An emergency fund is an amount of cash that you set aside in order to make sure that you protect yourself against life. Your car breaks down, you have money just there. If you have a health issue, you have money there to help you take care of it. There is power in having an emergency fund because it reduces your stress, it reduces your anxiety, and it makes sure that you have protection when life throws a monkey wrench in your way. And so, this is a very important thing to understand.

• 3:54Andrew Giancola?

  It is not if an emergency is going to happen in your life, there is going to be some sort of financial emergency that will happen in your life. It is just when will that emergency happen? We don't know. We don't have a crystal ball to know when that will happen, but you need to make sure that you protect yourself because it is coming down the line. It is going to happen. In the Bible, Proverbs 27:12 says, "The prudence see danger and take refuge, but the simple keep going and pay the penalty." And you want to make sure that you are taking refuge by making sure that you protect yourself with these dollars. You put these dollars somewhere and protect yourself. But the big Question then comes up, well, how much money do I need to keep on hand? Because most people have no idea really how much they should save. There's people out there to say, hey, start out by saving a thousand dollars. Start out by saving 500 bucks, save a couple thousand dollars.

• 4:38Andrew Giancola?

  But how much should you really save? Well, the answer, you're going to find out today exactly how much you should save. I'm going to talk through some of the obstacles that you may have by age. I'm going to talk through the 136 method and this powerful methodology that we created on how to build up your emergency fund to make it work for you in every single scenario, no matter what. And we're going to go through each decade, some considerations that you should have when you are building your emergency fund and maybe you need a little more than you thought you did. And so that's what we're going to be talking about in this episode. So if that's something you're into, let's get into it.

• 5:13Andrew Giancola?

  All right. So at the top of this episode, I want to make sure that first, we're going to dive into the 136 method. If you've never heard of the 136 method, this is our system on how to figure out how much you need to save for your emergency fund. But in addition, it's also going to be a way for you to learn, what do I do if I use my emergency fund? How do I build it back up? What steps do I need to take in order to make sure that I have enough based on my lifestyle? And so we're going to go through the 136 method to give you complete clarity on exactly what you need to do. And what this is going to do, it's going to reduce your stress with money. It's going to reduce your anxiety around money because imagine for one second here that all of a sudden your car breaks down. Well, if your car broke down and you're saying to yourself, well, I wouldn't have enough money to even cover

• 5:58Andrew Giancola?

  a portion of anything breaking down in my house or my car or whatever else. That is a situation you never want to be in. Now let me give you another scenario. When I first did this, when I first started to save money in my emergency fund, okay? I ended up saving up a couple thousand, then a couple thousand more to make sure that I protected myself. And you're going to see exactly how much you need here in a second. And all of a sudden my car broke down. And when my car broke down, I needed to spend $2,000 in order to fix it. Now, a couple of months before that, that would have been a daunting task for me. That'd been one of the most stressful things I ever went through because then I would ask myself, well, how am I going to pay my bills? I'm living paycheck to paycheck right now. I'm just out of college. I'm in my entry level job. I don't make much. Money, what am I gonna do? But instead, I had the money just there. The money was there, I took care of it.

• 6:43Andrew Giancola?

  And all of a sudden, the light bulb went off. Oh, my goodness, having cash on hand reduces your stress dramatically around money. It reduces your anxiety dramatically around money. Have you ever been in a relationship, for example? And you say, you know, maybe your husband or your wife starts to spend money on something specifically. And then something breaks down in the house. Okay, and you have to cover that breakdown. Well, what starts to happen? People start finger pointing at each other, saying to themselves, oh, you bought this, this, and this. And now we have to pay for the water heater blowing up. How are we gonna do this? And you start to get into these little arguments. The emergency fund solves that problem for you. All the stress and all the anxiety surrounding money is going to be solved if you have cash on hand. The emergency fund frees up your mind so that you can make better financial decisions moving forward

• 7:28Andrew Giancola?

  and build wealth, because it protects you on your wealth building journey. Imagine if something derails you and then all of a sudden you can't keep investing. And you're gonna miss out on those months of those gains. Or you can't max out your Roth IRA this year or your HSA this year. That's gonna make a big dramatic impact on your wealth long term. So that's what the emergency fund is going to help you do. So with the 136 method, step one is one. What does that number one mean? That means the first thing we want you to do when it comes to making sure that you have enough money is I want you to at least get to one month expenses. Now, how are you gonna do that? Well, first, you're gonna calculate your monthly expenses. So I want you to include your mortgage and rent. I want you to include your utilities. I want you to include your groceries, your insurance, your debt payments, and transportation. I want you to round up on this.

• 8:13Andrew Giancola?

  So let's say, for example, you spend $5,700 every single month. I want you to round up to $6,000. Okay, and so what I want you to do is for this first goal, you want to get to saving one month of expenses. Now, for some of you, that may sound like a daunting task. How the heck am I ever gonna be able to do that? We're gonna do it $1,000 at a time. So you're gonna get to your first $1,000. Then you're gonna go to your second $1,000, then your third $1,000, all the way up to whatever you spend every single month with one month. Okay, that is the goal. Where am I going to put this? I want you to put this in a high yield savings account. We're not going to invest these dollars. We're not going to put these dollars and stuff them under our mattress. We're not going to take these dollars and put it in the safe in our closet.

• 8:59Andrew Giancola?

  We are going to put this in a high yield savings account. Why? A high yield savings account has a higher interest rate than your traditional savings account at Chase or Bank of America or Wells Fargo or whatever other brick and mortar bank that you bank at. And so a high yield savings account is going to have a higher yield. You can go to Ally, you can go to Marcus, you can go to SoFi. There's a bunch of them out there. You can look at rates out there if you want to as well. Just find a reputable bank that also allows you to budget inside of that high yield savings account so that you can utilize the bucket method for savings. If you've never heard of that, we have another episode on how to do that. Okay. And so a high yield savings account is going to be a very important step here. Now start small, but I want you to be consistent here. Even if it's $25, even if it's $50, $100, I want you to be able to start to build up so that you can get to this first month expenses.

• 9:44Andrew Giancola?

  Also prioritize this fund over everything else. I want you to prioritize this outside of making the minimum payments on debt. I want you to prioritize this outside of, you know, when you're investing your dollars, outside of maybe something like getting your employer match. I want you to prioritize this because you need to make sure that you at least have one month of expenses on hand. Why? Because if something happens and you don't have cash on hand, you're just going to go backwards financially, further and further and further. And it's going to happen at some point in time in your life. You just don't know when. Now, if this is something where you are saying to yourself, well, I don't know. I don't even know how I'm going to save an extra dollar on hand. And we're going to need to increase our income. You have an income problem and we're going to either need to increase our income or look if we can cut back. For most people though, if you can't, you can only cut back so much.

• 10:29Andrew Giancola?

  And so you need to find a way to increase your income. We have tons, and I mean tons of episodes on exactly how to do that. Now, why does this step matter? One, it gives you breathing room between paychecks. Okay. Two, it prevents immediate financial panic during small emergencies. Small emergencies are why most people who live paycheck to paycheck, stay living paycheck to paycheck because they can't even take care of a small emergency. And so every little thing that happens just derails them financially. Financially, that's not going to be you anymore. This is going to change for you today. We are not going to get derailed financially anymore because you have a plan in place and we're going to follow this plan. It's your first step towards real financial independence also. Because anybody who has achieved financial independence know they have cash on hand to protect themselves against emergencies.

• 11:13Andrew Giancola?

  So that is what the one stands for. Now, after you have one month of expenses, the next thing I want you to do is if you have any high interest debt, any debt above a 6% interest rate, I want you to go ahead and I want you to start attacking that debt. So you have one month of expenses saved in high yield savings account. Now we are going to pay off this high interest debt that is anything above a 6% interest rate outside of your mortgage. Because of mortgage, you can refinance and we want to look at this in either two ways. You can do the debt snowball or the debt avalanche. We just had an entire episode talking about debt that you can go back and reference. But I would just continue to make sure that you have one month in place and then you go after your high interest debt and attack that as fast as you can. Any low interest debt below a 6% interest rate, that's not something you need to prioritize right away. Just make those payments.

• 11:57Andrew Giancola?

  But outside of that, the high interest debt needs to go away. If you have a credit card or a personal loan out there, or you have any high interest debt, you need to make sure that you take care of that first. Pause any other unnecessary spending until that debt is gone. It's really, really important to make sure that you do this because once paid off, it frees up cash flow so that you can grow your emergency fund more and then we're going to grow and start investing our dollars as well later on down the line. Here's the next step, okay? So you got your one month of expenses saved up, you paid off your high interest debt, anything above a 6% interest rate outside of your mortgage. Next, what are we going to do? Now, we're going to build up to three months of expenses, okay? This is the three in the 136 method, okay? We're going to go towards that three months of expenses and we are going to start to get the next two months.

• 12:40Andrew Giancola?

  So you already have one month saved, so you only have to save two months more of expenses. And so as you do this, I want you to recalculate all your expenses. It may have been some time since you did this calculation, so go back and see, do you have everything in place? Is this an accurate number? And then continue to contribute to your high yield savings account weekly or monthly. And the key thing here is just to set it up automatically. Automatically transfer it into your high yield savings account. That's why you don't have to rely on your willpower. It's just Automatically happens every single month. I have not made a transfer to my high yield savings account in some time because I have it all set up automatically. I don't even think about it anymore. It just happens. It just all goes in there. My account grows every single month and I am okay and I am A okay. But we need to get to three months of expenses. Why is this important?

• 13:22Andrew Giancola?

  Because three months is when you're starting to make some real progress here. Okay? You're starting to at least be able to protect yourself against a lot of big emergencies that are out there. And this is going to help you protect yourself when you know the car breaks down, the house has a big issue. Maybe you need a new AC unit or maybe your roof has a leak or maybe something big happens in your life. This will help you solve that problem. Maybe you totaled your car and you need the down payment for the next one. This is going to help you solve that problem is having three months of expenses in place. Also, it'll help you protect against some job loss, but the reason why we go to the next number is to protect you against job loss, which is the big, real reason why we have this emergency fund in the first place. Okay? Also, when you have three months of expenses, it helps you avoid dipping into things like 401ks or Roth IRAs or taking on additional debt for those big emergencies.

• 14:07Andrew Giancola?

  It saves you against that. So you don't make bad financial decisions and you could take smarter risks. You can think about a career change. You could think about relocation. You could possibly even think about, you know, a low cost business startup. There are a lot of things that you can do with three months of expenses in place and this allows you to get that ball rolling. Now, once you have that three months in place, now it's time to start investing your dollars. Cause three months is going to help protect you and now you can start to get on the investing train. So we have a bunch of episodes talking through how to invest your dollars and what order to invest them in based on your current circumstances. And so make sure you check that out if you haven't already. Now, the next step is once you have three months of expenses, I would split it off. Okay? So I would do half of my extra income going towards my emergency fund, the other half going towards my investments.

• 14:51Andrew Giancola?

  Until you get to the next step, which is the six, which is six months of expenses saved up. Now, there's a lot of people out there who are going to tell you to save three months of expenses and that's A okay. They think it's enough money there for you to have three months of expenses in place. I am not one of those people. I do not believe that three months of expenses is enough in an emergency fund. Why? Because. If you lose your job, let's take ourselves through this scenario right now. If you lost your job, your boss came to your desk and said, hey, you're fired. Or your boss came to your job site and said, hey, you're fired today. Well, if you only had three months of expenses saved up, let's go through this scenario. First, you're gonna have to get through the rest of the week to figure out, okay, what am I gonna do next?

• 15:34Andrew Giancola?

  Am I going to go, you know, find a new job in this industry? Am I going to take, make a move to try to call up some of my contacts? What are the next steps that I need to take in order to make sure that I can land a job quickly? Okay, then you're gonna start applying places. I don't know if you've applied to corporate jobs recently, but in the corporate world, it has been much more difficult to land a job. Because it is a lot easier for people to send out mass quantities of resumes. They get a high volume of resumes coming in. It's really about who you know now. It's about networking, it's about what you can do. Otherwise, you're gonna have to take a less than optimal job when you go through this process, okay? And so as you start to think through this, okay, well, it's going to take me maybe another week or two to get my resume ready. Okay, now my resume is ready and I'm gonna start sending it out.

• 16:18Andrew Giancola?

  Now, once you start sending your resume out, you're gonna notice pretty quickly, I've been sending it out for two months and I haven't gotten a response. Or I've been sending it out for two and a half months and I've gotten a response. If you only have three months of expenses, you're out of money by the time you even start to get responses on your resume, unless you have a really fantastic network. If you have a fantastic network, more power to you. You should be building your network within your career currently, right now, for in case this ever happens. It happens to some of the best employees out there, it could happen to anyone. But within your network, if you start to send out your resume and you have not gotten introductions, you're two and a half months down the line, you have two weeks left of expenses saved up, and that's a problem. You need six months of expenses, because then it's gonna take you another month or two to go through interview processes. Let's say you go through a couple of rounds of interviews in month three,

• 17:02Andrew Giancola?

  and maybe they weren't perfect fits for you, or maybe they just weren't offering enough money. Well, this helps you not have to take a job that does not fit what you want. Otherwise, if you have to take a reduction in pay, or if you have to do something along those lines, then you've just made a poor financial decision for your future. So instead, what you need to be doing is having six months in place to give you enough runway to go out and find a job. Job is not a quick thing right now. And so you got to make sure that you have enough runway for that. That is why we build up to six months of expenses. So, once you get to six months of expenses, I want you to double check your numbers and make sure have any of those expenses changed. Continue funding that high yield savings account. And then if you prefer to keep three months in cash and three months in low conservative investments like short term bonds or money market funds, you could.

• 17:46Andrew Giancola?

  I just keep it in a high yield savings account to make it easier because people are going to ask that. That's why we're throwing that in. Now, why this step matters. Again, you're protected during long term layoffs. You can find the right job instead of the first job and it's probably closer to your sleep well at night number, which brings us to what is the swan number? So there is something we developed called the swan number. Sleep well at night. This is the final number that you want to get to when you're building out your emergency fund. Meaning, you know, Andrew right now is saying it's six months of expenses, but really I wouldn't feel good until I had one year of expenses saved up, or I wouldn't feel good until I had nine months of expenses saved up, or I wouldn't feel good until I had seven months of expenses saved up to give me an extra month of runway to find a job. Well, if that's you, what's your swan number? What's your sleep well at night number?

• 18:29Andrew Giancola?

  And we're going to make sure that that swan number is part of our goal. Okay, for some people, it's going to be more than others. And that is okay if you have a big swan number. If you're like, I need two years. It's okay. All of us have different numbers and we utilize money as a tool to reduce our stress, to reduce our anxiety, so that we can live the life that we want with financial freedom. And we're not just going to follow some rule because some guy on the internet told me to. Instead, what you need to do is figure out how much cash do I need to sleep well at night? Okay, now if your answer is three months, you're wrong. I'm going to tell you that right now. The reason for that is because you still need to have the extra cash on hand to protect you against anything in life. Three months is not enough, but if it's six months or beyond, that is something that you could definitely, definitely think through.

• 19:12Andrew Giancola?

  So, all this to say is this is how the 136 method works. Is we have an entire episode on the 136 method that dives even deeper into all these different details. You may be asking yourself, well, what happens in this scenario or what happens in this scenario? Or what if I spend my emergency fund? If you spend it, you just go back and follow the 136 method again. But in that episode, we talked through exactly how that works. I would make sure you check that one out if you haven't. Now, let's get into how much you should save in your emergency fund by age.

• 19:43Andrew Giancola?

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• 20:28Andrew Giancola?

  upcoming expenses, or shifts in my net worth before they become a problem. Instead of reacting after the fact, I can make adjustments early. It really feels like having a financial advisor in your pocket. Write your own money story with Monarch. Use code PFP at monarch.com to get your first year of Monarch Core half off at just $50. That's 50% off your first year at monarch.com with code PFP. If you've heard any recent episode of Health Corner, you know that I have spent the last few years trying to optimize my sleep. I've tried sleep trackers, cooling my room, changing my nighttime routine, all the different things. But nothing really matters as much as having the right mattress.

• 21:13Andrew Giancola?

  And that's one of the reasons I love Lisa. A great mattress is one of those things that you use every single night and you spend a third of your life sleeping. And it can make a huge difference on how you feel the next day. Lisa has mattresses designed for different sleep positions and comfort preferences. And their sleep quiz can help you get matched in less than two minutes. Plus, they're designed and they're assembled in the USA, and they come with free shipping, easy returns, and a 12-night free sleep trial. So go to lisa.com for up to 30% off mattress plus and get an extra $50 off with promo code PFP. Exclusive from Monarch.

• 21:52Andrew Giancola?

  Listeners, that's L E E S A dot com promo code PFP for 30% off mattresses plus an extra $50 off. Let them know we sent you in the survey after checkout. Lisa.com promo code PFP. It's kind of amazing how much can change in just a single year. Every summer, the kids are a little bigger, a little more independent, and life looks a little different than it did the year before. And it reminds me that while we can't predict the future, we can prepare for it. That's one of the reasons I like PolicyGenius. See, PolicyGenius isn't an insurance company. They're an online marketplace that lets you compare life insurance quotes

• 22:33Andrew Giancola?

  from some of America's top insurers side by side for free. And their licensed team helps you compare coverage, prices, and terms, answers your questions, and even handles the paperwork so you can get the right policy without the hassle. For me, having life insurance isn't about expecting something to happen. It's about knowing my family is protected so I can actually enjoy these moments together instead of worrying about what comes next. And with PolicyGenius, you can find 20-year life insurance policies, starting at just $276 a year for $1 million of coverage. Head to PolicyGenius.com to compare life insurance quotes from top companies and see how much you can save. That's PolicyGenius.com.

• 23:15Andrew Giancola?

  If you've been listening to this show for a while, you know it's not just me anymore. It takes a great team behind the scenes to make everything happen. And if I had to hire someone tomorrow, I'd want someone who could jump right in and make an impact. That's why I'd use Indeed Sponsored Jobs. When workplace chaos hits, Indeed Sponsored Jobs helps you reach qualified candidates faster. Your job gets boosted in search results, so you're spending less time searching and more time interviewing the right people. Plus, you only pay for results, which I absolutely love. Sponsored jobs posted directly on Indeed are 95% more likely to report to a higher than non-sponsored posts. That's a huge advantage when you're trying to grow your business. Spend less time searching and more time actually

• 24:00Andrew Giancola?

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• 24:43Andrew Giancola?

  Now, that may not be the case depending on your life situation. But for a lot of folks in their twenties, here's what I'm going to say to you. You need to take the 136 method very seriously. This is your time to build out that foundation for your emergency fund. And this is the time you need to take it very seriously because it's going to set you up for the rest of your life. If you already have an emergency fund built and you have to utilize that emergency fund, it's going to be a lot easier to build it back up than if you never had it whatsoever. So if you are in your twenties, make sure that you protect your financial life and you do it as early as possible. This is going to help you tremendously as time goes on. So I want you to take that one month and make that your first goal. Let's say you just graduated college. Well, go towards that one month goal,

• 25:25Andrew Giancola?

  then go towards that three months goal, and then finally that's six months of expenses. This is going to give you stability throughout your twenties when you are trying to build up your career. This is going to give you stability throughout your twenties when you are trying to maybe go out and get married. If you want to go get married, you need to have an emergency fund in place so that you and your spouse are protected. This is going to give you stability so that you can add to your emergency fund when life changes. But it is imperative that in your twenties, you make sure that you have an emergency fund in place. Now, the average savings in the U.S. currently is $11,200 for somebody between the ages of 20 to 29. And the median savings is $3,240 for someone between those exact ages. And this is the data from the Federal Reserve.

• 26:08Andrew Giancola?

  About 36% of people in their twenties have less than $1,000. Thousand dollars saved up and nearly 20% have zero dollars in emergency savings and you have no idea how dangerous that can be. Now in your twenties, I understand your income is not as high. It is very difficult to save up enough money, which is why you need to utilize this entire decade to get to that six month goal if you can, because this decade is imperative for your investments and it's imperative for your financial foundation to make sure you have both of those things set up. Only 27% of folks who are Gen Z, between ages 18 and 26, say they have an emergency fund that could cover three plus months of expenses. That's according to Bank of America and Gen Z is saving on average 14% of their income. So that is much better than some

• 26:52Andrew Giancola?

  of the previous generations, higher than millennials for sure. And this is from a fidelity report in 2023. There's other notable stats that 53% of Gen Z workers are already contributing to retirement accounts and 69% say building wealth is a top priority. So Gen Z, you are doing fantastic in terms of looking at wealth and understanding how wealth works. And if you are someone who is a younger millennial, then you need to take this more seriously. You need to make sure that you are doing this and taking this more seriously going forward. So your twenties are the time for building. This is a time to build up your emergency fund for most people and have that financial foundation. Now, as we get to the next ones, obviously the 136 method, if you have not started that already and you're not to six months of expenses, that's going to be priority

• 27:36Andrew Giancola?

  as we get to some of these other decades. But in your twenties overall, most of you are not going to have a fully funded emergency fund yet. I want you to build it and I want you to focus on that. That's going to be very, very important. In addition to understanding the compound interest and time are so incredibly valuable and investing your dollars going forward is also a big goal that you want to go after. So these stats are ones that I want you to make sure that you focus on and going forward, let's make sure we get on the path to saving our first six months. Now let's get into the thirties.

• 28:06Andrew Giancola?

  All right, so now we are moving on to folks who are in their 30s. And in your 30s, this is going to be a time where maybe you're getting married, maybe you're having kids. This is the time where it gets a little messier when it comes to your life. You have less time than ever. You're working on building up your career. You're working on trying to balance that with spending time with your family, spending time with your spouse, spending time with your friends, trying to do those hobbies. And life gets tricky. And so because life is so tricky, this is why it is imperative for folks in their 30s to make sure they are building out that emergency fund. A lot of life factors are also going to come into play here. What I like to do is when it comes to my emergency fund, I like to think through, okay, well, with each child within my life, I have three kids now. All three are under the age of seven.

• 28:48Andrew Giancola?

  And so with each child, I like to add an additional month to my emergency fund. That is just one of my personal rules, one of the things that I like to do to have an additional cash cushion when there are more people in my life that depend on me. And so because of this, I like to think through this when I start to have lifestyle changes. So for example, my daughter was born late last year in October, and when she was born, I increased the amount that we had in our emergency fund purposefully. I made sure that we had a plan in place. I made sure that we had enough cash on hand to take care of any other emergencies that could arise. Why? Because let's just say, for example, your kids are more prone to getting sick or breaking an arm, or something could happen to them, okay? Or something could happen in their life, and you're going to need some extra cash on hand.

• 29:31Andrew Giancola?

  And so for me, when it comes to my 30s, I do this to protect my family. And/or if you're someone who is single, and then you're getting married in your 30s, that is happening a lot for folks in their 30s. If you get married in your 30s, well, your emergency fund needs are going to change because now there's two people involved instead of one. Sometimes it becomes a lot easier because you have two incomes instead of one if both you and your spouse work, but sometimes it doesn't if you plan on not having your spouse work. So you just got to look at your lifestyle differences and what is going on. Now, 47% of Americans between age 30 and 39 say they could take care of some emergency if it happened within their life. And the median account balance in someone's savings account between these ages of 30 to 39 is $7,500. For most people, that is not even going to be close to high enough of how much you need to have.

• 30:15Andrew Giancola?

  That's total savings, including brokerage accounts. And so for a lot of people out there, we need to make sure that we are looking to look at our emergency fund needs. So the first thing you do is in your 30s, you need to reassess your emergency fund needs. If you have kids, if you have a mortgage or dependents, a full six month fund becomes critical. Now, let me tell you this right now. If you are someone who is going out there and you're buying a house and you don't have a six month emergency fund, you own a house, you are making a massive mistake. One of the parameters before you buy a house is you need to have a fully funded six month emergency fund. That is our rule. You have to have six months in place. If you have three months in place, well, guess what? If that roof caves in and you have a big issue with your roof, you got a whale of a problem. Roofs don't cost $7,000 like they used to anymore. They cost a lot more than that.

• 31:00Andrew Giancola?

  And/or if your AC goes out, or what are you going to do if your water heater goes out? Guess what happens? Homeowners, when something breaks, it's going to have, you're going to have three things in the house break at the same time. If you have ever experienced this before, when it rains, it pours. And so if you're a homeowner, you've got to make sure that you have enough cash on hand to take care of this stuff. Emergencies aren't just job loss anymore. They are for all these other things. Think medical bills, home repairs, needing to take an unpaid leave because your kids get sick. There could be so many different things that happen and you need to make sure that you have that cash flexibility. Now, when you think about this, I put all, again, even in my 30s, I put it all in the high yield savings account. Can you divide it up in buckets? If you have more than six months in your emergency fund, you absolutely can. You could think through, okay, well, how do I want to divide this up? Do you want to look for some sort of bond exposure? Do you want to look at something else?

• 31:45Andrew Giancola?

  You definitely can. All of mine just goes in a high yield savings account. And if you have a really big emergency fund, then I would reconsider exactly how you want to do that. Now, if you don't have an emergency fund in place, one thing you can do currently is while you're building your emergency fund, if you're in your 30s and you're like, oh my gosh, I have all these responsibilities, I don't know what to do. As you're currently building your emergency fund, you can look into opening something like a HELOC, for example. I don't recommend this for like your actual emergency fund, but while you're building it up, you can look into, you know, opening a HELOC if you have equity in your home. And that will at least be a last resort emergency fund if you need it. And you can use that as a backup plan. I encourage really anybody who has equity in their home to at least have a HELOC open for worst case scenario, the sky is falling situations. At least you have that in place. You don't have to tap into your retirement accounts

• 32:28Andrew Giancola?

  or something else like that. And so making sure that you have that in place is also a great backup plan for a lot of folks in their 30s who do own homes. That is one big benefit of owning a home is you do have some additional flexibility options that you can have there as well. Now, also in your 30s, if you're not investing yet, you need to make sure that you're investing. You got to continue to invest aggressively because you need to make sure that you're building wealth and growing your money over time. Very, very important for folks in their 30s because life is just messy in your 30s. And it's only going to get messier when you get to your 40s, which we'll talk about in a second, but your responsibilities are going to grow. The amount of money that you need on hand is going to probably most likely grow. And this is where you're going to start to think through, okay, well, as I approach retirement

• 33:09Andrew Giancola?

  age, how much do I feel comfortable with in retirement as I approach retirement? Because I think the emergency fund needs to be even larger the closer you get to retirement. And so as that happens, we need to make sure that we have enough cash on hand in order to make that work perfectly. So that is the 30s. Let's jump into the 40s. All right. So let's look at the 40s now. The average monthly expenses for someone in their 40s is $8,110 per month. Now, this is depends very depending on where you live. It's very dependent on where you are, but that is the average, which this means your emergency fund needs to be approximately about 50 grand when you get to that point in time if you are spending that much. And so when we're thinking about this, we need to make sure that only because

• 33:49Andrew Giancola?

  for folks who are in their 40s, really only about 52% have at least three months of expenses saved up. Okay, only 52% have half of what the 136 method it kind of talks about. And so it's really, really important to make sure that over time you can really have this in place because 37% of US adults tapped their emergency savings over the course of last year. And 26% withdrew between $1,000 to $2,500, 22% withdrew between $500 and $999, and 15% withdrew $5,000 or more. And so this is why in your 40s, it is so incredibly important to have this in place because you are approaching retirement age. And the last thing you want to do is start to derail your retirement because you only have a couple of decades left.

• 34:33Andrew Giancola?

  You got to make sure that you have that. Wordsy fund in place. So again, when you start your 40s, let's audit and adjust. So let's look at our expenses because often expenses rise again in this decade because you have college savings. You have aging parents, you are juggling a lot of very difficult things. And as your kids get older, maybe they start to go into youth sports, for example. And if you are traveling around the country right now, following your kid around youth sports and your weekends are taken away, you know how expensive that can get. And so the monthly needs for someone who is in their 40s is just going to continuously start to rise. Secondly, is making sure you have the correct insurances in place. The other thing that you do not want to get derailed, and we just had an episode recently on the insurances you need

• 35:14Andrew Giancola?

  and the ones you don't need, but you do not want to get derailed when it comes to your insurance coverage based on anything that could happen in life. So making sure you have those correct insurances is very, very important. And then begin to think about, okay, well, how much do I want to have on hand when I get to my 40s? Because it gets a little messier, but in addition, as you get closer to retirement age, I am a big proponent of having a couple of years of cash on hand when you get to retirement. Why? Well, when the market drops and there are really bad years, for example, let's say, for example, 2009 happened in the Great Recession. Well, into that year, I'd probably like to not withdraw money from my retirement accounts because that is a very drastic situation that could have been resolved if you had two or three years of cash on hand.

• 35:58Andrew Giancola?

  Where I would at least like to give myself a one-year cushion to figure out what I'm going to do and draw down on that cash on hand. That's what it's for. And so having additional cushion just helps you have additional flexibility to give you more time to figure life out. It's really important to make sure that you can figure life out. And so I like to have that additional cash on hand. You could put a portion of it in bonds. You can put a portion of it in something that grows maybe a little more than a high-yield savings account. But thinking through what that number is so that you can set that goal and start allocating small amounts of money over time to hit that goal. What you don't want to do is get to age 55 and say to yourself, okay, well, I want to retire at age 59. Oh, shoot, I need to save two years of expenses because that is a very difficult thing to do. Instead, what you want to make sure that you are doing is that you are working towards that goal over time.

• 36:43Andrew Giancola?

  That is going to be the most helpful thing. That you can do overall. And so insurance does become part of your safety net as you start to go down the line in your 40s and it gets a little messier always. And if you're getting married or your kids are getting older, or maybe you're just having kids, then you definitely want to make sure that you are adjusting based on that. It's going to be very, very important to do that, but also just thinking, you know, forward and beyond. Now, let's jump to the 50s.

• 37:09Andrew Giancola?

  All right, so in your 50s, this is going to be where you need to shift to the full buffer mode. We need to make sure that we have everything in place in order to ensure that we have savings in our 50s because we are approaching retirement age and we want to make sure that we have enough there. We've got a decade here of time where we can start to build that emergency fund up. So the average emergency fund balance for folks in their 50s with children is only 17,587 and without children, it's 15,722. And the average emergency fund balance for singles is 6,900 and 6,700. Now, this is something I think for a lot of people that we realized pretty quickly that this couldn't be the best option. 38% of Gen Xers actually stated that they tapped into their emergency savings last year.

• 37:54Andrew Giancola?

  26% withdrew between 1,000 and 2,500, 22% between 500 and 999 and 15% withdrew 5,000 or more. And so that shows right there that there is a chunk every single year that have utilized their emergency savings. And so making sure that you have this emergency fund in place is going to be very, very important for most people. You've got to have an emergency fund in place, especially in your 50s. As you get and approach your 50s, you need to get it to six months and you need to get it beyond six months because as time goes on, you want to have that protection in place. Now, when you reach retirement age, if you own a home, if you own different assets and you have enough assets in place that can protect you, you may not need a couple of years if you're okay with it. If your SWAN number is there, if you sleep well at night, not having, you know, two years

• 38:39Andrew Giancola?

  of emergency fund expenses, my rule personally is two years, but if you don't have two years... And you don't want to go that route. That's fine, but you just need to make sure you have a plan in place. What are all the scenarios? What happens if the market goes down? What's going to happen? How much am I going to withdraw? Am I going to adjust my spending overall? Cause I'm really a guy. Your boy just doesn't want to adjust to spending. That's typically what the way I am is I don't want to adjust how much I'm spending always. And so that is what I'm trying to protect for as well. And so overall I will, I definitely would if I needed to, but I try not to if I don't have to. And so that's kind of partially why I like to have an additional cushion on hand. But also it's when the market downturn happens, I'm going to be utilizing the cash I have on hand, at least for a couple of months. And if I figure out exactly what I want to do when those downturn happens.

• 39:24Andrew Giancola?

  So it gives you financial resilience. It gives you the ability to not have to go into debt for any reason whatsoever. Because really you don't want to be ever going into debt when you hit that retirement age. And it gives you some additional action steps to help you build up that emergency fund. So you don't have to worry anymore. It takes away the stress and takes away the anxiety. The last thing you want retirement is to be stressed. You want to make sure that you can enjoy your retirement with no worries whatsoever. You're chilling, doing the things that you want, giving back to the causes you believe in, doing the work that you want to do, because retirement isn't always about just sitting around. It's about doing the work that you want to do that's important to you. And you can start to really build out a business that works for you. So then in moving forward, you can really be happy, have a comfortable retirement and be able to live the life that you always wanted.

• 40:08Andrew Giancola?

  So these are the steps I would take based on the emergency fund. Now for folks who are self-employed, we're going to throw this in here. If you are self-employed, I would give enough runway for you to keep the business going. If the business started to struggle and you did not have an income coming in. So now we're looking at nine months to a year in savings. If you are self-employed or someone who needs to make sure that you have enough runway for that. So that is the other caveat that I would throw in for all these additional ages is folks who are self-employed need to have a little more in their emergency fund. Well, that is the show for today. Thank you guys so much for being here. I truly appreciate each and every single one of you. And my entire goal is to make sure that we bring you as much value as possible. And I'm here to serve you. So thank you guys so much for being here.

• 40:50Andrew Giancola?

  I hope you got some value out of this episode and we will see you on the next episode.

• 41:08Speaker 01

  At Edward Jones, we believe rich is more than caring about the latest and greatest. It's also taking care of what gives your life meaning. That's why your dedicated financial advisor meets you where you are, with personalized financial strategies that help protect what matters, so you can preserve your progress while creating a path forward. The key to being rich is knowing what counts. Let's find your rich together. Edward Jones. Member SIPC.