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How Much Should You Have in Emergency Savings on a Lower Income?

You’ve surely heard that you should have some money put away for emergencies, especially if you are in a lower income bracket. How much? Probably depends on who you ask.

Some people say you need a whole year’s worth of salary for an emergency situation. Some say six months worth. Let’s be honest, though, it can be hard nowadays to put aside a month’s worth of salary let alone six. But, is there an actual figure that isn’t based on conjecture?

There just might be now!

According to new research recently published by Emily Gallagher a financial professor at the University of Colorado and an economist at the Federal Reserve Bank of St. Louis, and Jorge Sabat, a financial professor at the Universidad Diego Portales in Chile, the magic number for emergency savings is $2,467.

“[O]nce you have at least $2,467 stored away for a rainy day, your probability of experiencing hardship in the next six months is low, and saving an additional dollar doesn’t seem to help reduce that probability very much,” said in a MarketWatch article.

According to MarketWatch, Gallagher and Sabat reached this number by crunching data from the 2009-2011 U.S. Census’ Survey of Income and Program Participation. They looked at 70,274 households that had incomes below 200% of the poverty level.

That $2,500 figure doesn’t cover every hardship, of course, but it is a number to strive for to keep most hardships at bay until you can get back on your feet.

Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Please consult with your financial advisor about your individual situation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

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