Andrew, a 29-year-old product manager for startups and digital companies in Austin, Texas, has always heard the general rule: save enough money to cover three to six months of essential expenses, such as housing, utilities, groceries, transportation, and debt payments, in case of unemployment.
“I just took it at face value,” he admitted to BourseWatch.
But as the computer sector deteriorated over time and businesses let go of thousands of employees, he started to worry that his emergency savings would not be enough. It was taking more than six months for laid-off peers in comparable roles to find employment; one had been applying for a year and a half.
Although cutbacks at his work haven’t affected Andrew yet, he now has nine months’ worth of expenditures saved up in an unemployment emergency fund. Andrew requested that his full name not be used in order to preserve his privacy. He claimed that although this is longer than the three to six months that are typically mentioned, it is not excessive for those in his line of work. “Nine months is actually probably more of a better benchmark,” he said.
As of December, the average length of unemployment in the United States was 23.7 weeks, or almost 5.5 months. The length of time people spend searching for a new job in the United States has increased since the Great Recession, albeit it varies by industry and occupation. However, the majority of people have yet to modify their savings to take that into consideration.
The length of time that Americans remain unemployed after losing their jobs changed during the recession. Workers can get unemployment benefits for up to 26 weeks in the majority of states, and the Labor Department defines “long-term unemployed” as those who have been unemployed for 27 weeks or more.
According to data from the Bureau of Labor Statistics, there were no quarters between 1948 and 2007 where the average duration of unemployment was 27 weeks (6.2 months) or more. However, 32 such quarters have occurred since 2008, including four since 2020. Compared to 20% in December 2023, over 22% of unemployed people have been unemployed for 27 weeks or more as of December.
According to Spenser Liszt, a licensed financial planner and the creator of Motif Planning, “the old advice to save three to six months of emergency money fails to protect workers today,” he told MarketWatch.
Frequently, emergencies last longer than three months.
Three months’ worth of savings is regarded by the Federal Reserve as “a common measure” of people’s “financial resiliency.” In 2023, about half of Americans had this amount saved for emergencies, compared to 59% in 2021, when pandemic relief funds were still available. However, having three months’ worth of savings on hand in case of an unexpected loss of income might no longer be a sign of sound financial standing.
If an individual works in a somewhat stable field with high demand for people, a three-month savings cushion might be sufficient, but this is assuming that many things go their way and that they don’t incur any extra unforeseen costs while they are unemployed, experts told MarketWatch.
John R. Power, a financial advisor in Massachusetts, told MarketWatch that “three months is cutting it close” and that it is only recommended for people with high levels of job security, such as those in civil service positions. “Most people don’t have this,” he continued.
According to Aspen Wealth Management financial planner Elizabeth Windisch, “six months really should be your minimum,” she told MarketWatch. “It is pretty unlikely that someone can get a new job, start that job and receive income from that job within three months.”
“Doesn’t always give you a lot of wiggle room,” personal-finance expert and author of “Money for Couples,” Ramit Sethi, stated in a recent video after saving three months’ worth of the bare minimum. “If you have a six-month emergency fund, you’ll be prepared in case something more extreme happens, like a job loss.”
“Six months really should be your minimum.” Aspen Wealth Management’s financial planner, Elizabeth Windisch
Not all firms provide severance, and not all employees are eligible, but some laid-off workers may find that severance payments provide an extra financial cushion. According to a Randstad survey, just roughly one-fourth of American businesses stated that all of their workers are eligible for severance pay in the event of a layoff.
Even though their actual savings don’t support their opinions, it seems that many workers already concur that a larger safety net is necessary in the modern day. According to a 2024 BankRate study, 72% of participants stated that they would need to have at least six months’ worth of emergency funds saved in order to feel secure, while 21% stated that they would need three to five months’ worth. Many people, however, don’t meet these targets: 28% claimed to have an emergency fund that lasts six months, 16% said they had a fund that lasts three to five months, and 27% stated they have no emergency savings at all.
According to financial advisors, consumers should keep in mind that their emergency fund offers stability not just in the case of losing their work but also for other situations like medical bills or maintenance for their homes and cars. For instance, investment firm Vanguard advises having half a month’s worth of living expenses saved as part of an emergency fund, while author and “Money Guy” podcast presenter Brian Preston advises having your insurance deductibles covered.
According to a YouGov survey, saving more money was the most popular objective for 2025, more so than exercising and becoming healthier.
Age and industry differences in unemployment
Comparing November to 2022, the most recent jobs data revealed a weaker labor market, with fewer job vacancies and fewer employers adding employees. Despite the low layoff rate, few employees are quitting their jobs due to the difficulty in finding new ones.
In addition to the fact that the rate of job creation has slowed overall, the Indeed Hiring Lab found that only three industries accounted for over 75% of all positions created in 2024: government, healthcare and social assistance, and leisure and hospitality.
“I’m a big fan of having 12 to 18 months of expenses.”Green Bee Advisory’s financial planner, Catherine Valega
According to financial planners, workers in this economy should strive to have more than six months’ worth of savings to get them through to their next job without having to make difficult decisions or incur credit card debt. This is especially important for workers in industries that are stagnant or volatile, contractors, one-income households, and senior roles that may take longer to find a comparable job.
“I really like having 12 to 18 months of expenses,” said Catherine Valega, a Green Bee Advisory financial adviser. “With my clients that are high earners in the tech space, I’ve seen it taking a long time to find the right job, or perhaps start their own business.”
According to occupation, the longest average duration of unemployment as of December was 29.9 weeks, or 6.9 months, for employees in office and administrative support roles. This was followed by those in management, business, and financial operations roles (29.3 weeks, or 6.7 months) and sales (28.7 weeks, or 6.6 months). The shortest average duration of unemployment was experienced by those employed in forestry, fishing, and farming (8.9 weeks, or two months).
According to BLS data, employees in public administration had the least unemployment duration (12.6 weeks, or 2.9 months), while those in education and health services had the longest (32.7 weeks, or 7.5 months).
According to Liszt of Motif Planning, who works with music executives, those in that field “may spend a full year or more searching for new jobs” and “when they land positions, they often accept lower salaries than before.” He pointed out that the music industry has sharp fluctuations, and that streaming services, which have revolutionized the way the industry makes money, have made it harder for those who work for record labels, music publishers, and concert venues to have a stable career. He thus suggests that people save enough cash to pay their bills for nine to twelve months.
When determining the appropriate amount for your jobless emergency fund, there are more factors to take into account in addition to your industry and vocation, according to Crystal McKeon, a financial advisor with TSA Wealth Management. “The unfortunate reality is that finding a job may take a lot longer until you reach your 50s and 60s. As I become older, I would put more money aside for emergencies,” she told MarketWatch.
According to Guy Klose, a tech worker in the Northeast, he has been laid off multiple times since he was 40 years old in the past 20 years, with the most recent layoff occurring in 2020. He and his spouse were laid off within months of each other the first time. According to him, they “managed by going into what I now call ‘austerity mode,’ where we cut expenses to the absolute bare minimum,” and they were dependent on savings and unemployment insurance. Then, he said, “I made it a priority to beef up emergency savings” to meet costs for at least six months.
“After going through this several times, I’ve found that the uncertainty is the worst part. You never know when you’ll find a new job or whether you’ll need to find temporary work,” he remarked. “Having more than six months’ worth of living expenses really equates to increasing comfort because of the uncertainty.” Klose intends to continue working at his current position until he retires, keeping his six-month emergency fund intact.
