NEW YORK (MainStreet) Losing a job means financial hardship for 40% of Americans, because they lack having an adequate emergency savings fund, according to a recent Gallup poll.
Four out of ten employees said their current savings would only pay their bills for one month. Employees remain overwhelmingly optimistic with only 16% who believe they would lose their job, the poll said.
Consumers should have three to six months of monthly expenses in a savings account or money market fund, said Kimberly Clouse, chief client advocate at Covestor, an online marketplace for investing with offices in Boston and London.
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"Everyone should create an emergency fund, and it's even more critical for entrepreneurs and other earners who may not have a steady income," she said. "An emergency fund allows you to use cash to pay for those random expenses or emergencies that arise in your financial life, instead of creating more debt or tapping into long-term investments. You want to be able to tap into these funds easily, but you don't want to tap them unless you really need to."
The pressure to find a job increases for the majority of Americans since 14% of people said they only have enough savings for one week while 29% said their savings would last one month. While 26% of respondents said their savings would last four months, only a small minority or 17% had enough money to be out of work for one year, the poll said.
Some people do not have an emergency savings fund, because they do not think they could lose their job. The poll found that only 5% of workers who say they are "very" likely while 11% say they are "fairly" likely to lose their job during the next 12 months. In 2010, that percentage totaled 21%, which was a year of high unemployment, but has averaged 14% since Gallup first posed the question in 1975.