Life Insurance
Insurance 101
Live Chat
Sign In
Apply Now
Modern Family Finances

What You Should Know About Your Emergency Fund During COVID

By Jessica Sillers Feb 16, 2021

In this article

What Is an Emergency Fund?

What to Do If Your Rainy Day Savings Are Gone

Give Your Finances a Health Check-Up

The good news: 2020 is behind us. The bad news: The pandemic and its economic challenges may follow us for a while, and some families have exhausted the emergency cash they’d usually lean on in if they found themselves in a bind.

It sounds good to say that we’re “all in this together” but honestly, that’s not always true. Our ability to work from home, find reliable childcare and build savings may not match our neighbor’s. Some families are in dire financial straits, while others may just need a quick check-in to confirm that their savings are on track.

One thing we can all do is take a breath and acknowledge that we’re doing our best in a challenging time. From there, we can take a clear look at our finances. 

What Is an Emergency Fund?

An emergency fund is a fallback in case of the unexpected, like a job loss or extended illness. Unsurprisingly, emergency funds are especially important for people with families.

Look up how much to save in your emergency fund, and you’ll probably get an unhelpfully wide range of responses. Some financial gurus recommend a minimum of $1,000. Many financial experts set the target anywhere from three to 12 months’ worth of your typical income. 

Part of the issue is defining what the emergency fund is for. Are you hoping to cover an unexpected, one-time expense in cash? Or are you preparing for a more extended period of financial difficulty? 

Ideally, of course, you’d have enough in savings to cover both unexpected bills and long-term emergencies. If saving is hard right now, it’s better to start small than give up because the target seems unattainable. In time, it might be worth opening two accounts so it’s easier to see at a glance what you’ve allocated for one-time expenses and what you have available for longer-term emergencies.

Short-term emergency cash

Having cash on hand to cover a hospital visit or a car repair can keep a one-time crisis from turning into a long-term financial problem. Fortunately, protecting yourself against one-time emergency expenses is easier than saving the three to 12 months’ worth of income experts recommend for a long-term savings fund.

“Building up such an extensive emergency fund in a short amount of time may not be realistic for many families. The key is to continue making progress and set aside what you can, no matter how small,” says Certified Financial Planner Drew Feutz. 

He cites a recent study that nailed the target savings amount down to the dollar: $2,467. The study’s authors based this figure on what a low-income family might need to stay on top of rent, bills and medical care. They also consider that lower-income families face obstacles that make them more vulnerable to hardship (like lack of generational wealth, compounding hardships when covering one unexpected expense leaves you unprepared for the next). 

If your family is middle-class, you might follow the same general process to arrive at your own numbers: Calculate your own monthly income or your healthcare deductible as your target, whichever is higher. That way, you can feel confident that you can handle a medical emergency or a few weeks without work.

Long-term emergency cash

If experts say you should save three to 12 months’ worth of income, how are you supposed to find your sweet spot in that range?

Feutz says to consider the factors that could influence how long you’d depend on your savings. “As we unfortunately saw throughout 2020, job stability is a major factor. Other things to consider when determining how much you should keep in an emergency fund are your employability… how much you spend monthly, and how much you could cut back if something happened.” 

Write out your usual household budget, then see which expenses you’d cut if you needed to. You can base your emergency savings on a belt-tightened month, rather than how you might spend when finances are normal. If losing your job would affect your insurance, or you have high deductibles, these can also affect how much you’d need to factor into what you’d need per month in an emergency.

Finally, think about your family and who else might be affected if you lost your job. How flexible could you be? If you’d be able to relocate for a job or even move back in with parents or friends if you needed to, you may be able to aim for the lower end of the three to 12 month recommendation. By contrast, a family relying on one income and hoping to keep kids at the same school should probably think about planning for a larger emergency fund.

What to Do If Your Rainy Day Savings Are Gone

Even families who saved diligently didn’t anticipate a pandemic that would affect schools and businesses for months on end. About 14 percent of Americans have burned through their emergency savings to make ends meet through the pandemic. The challenge is what to do if you’ve wiped out your savings, and the emergency isn’t even over.

“Some of the smartest ways that people can use stimulus money are to simply feed your family and pay your bills if you’re in a dire situation, set aside the money in an emergency fund if you need to add to your cash buffer, or to pay off high interest debt,” Feutz says. If you’re struggling to meet basic needs, you need solutions to cover essential expenses before you can think about rebuilding savings for the future.

If your savings are dwindling and you’re not bringing in enough money to cover essentials, try these options to get back on steadier financial footing:

  • Track spending: If you’re not following a written budget, write one today. You might be surprised to find expenses you can cut.

  • Update tax withholding: If you’re getting a tax refund, that means you overpaid taxes all year. Talk to HR or payroll staff to update withholding and keep more money in your paycheck.

  • Home equity line of credit (HELOC) or personal loan: Although you don’t want to over-rely on debt for funding, Feutz says loans or a HELOC can provide a temporary emergency funding source. 

  • Find unclaimed money: Official databases can help you prove and recover money from unpaid wages, insurance refunds, undelivered tax refunds and other sources. 

  • Pause retirement contributions: Contributing to a 401(k) or other retirement plan is an important part of preparing for a secure financial future. If your current situation is dire, though, decreasing or pausing contributions for the short term is an option to consider.

  • Consider borrowing or withdrawing from retirement funds: If you’re affected by disasters other than the coronavirus pandemic (e.g., California wildfires), you may be able to take an early distribution from qualifying retirement funds without the usual 10 percent penalty, as part of the Consolidated Appropriations Act, 2021. You’ll still have to pay income tax on the withdrawal.

  • Call 211 or visit This service offers confidential support for domestic violence or suicide crisis help, and in many areas, operators can also connect you with local help for essential needs like food, safe housing and affordable healthcare.

  • Check if you’re qualified for financial assistance: National programs offer financial aid for people in certain industries (e.g. freelancers, gig workers, restaurant workers) or family situations (e.g. family members with cancer, families who lost a frontline healthcare worker to COVID-19).

Give Your Finances a Health Check-Up

While pandemic-related shutdowns and job losses wiped out savings for some families, others are actually seeing an increased bank balance. People who were fortunate enough to keep their jobs throughout the last year may have cut back on travel, dining out or other activities they’d normally spend on. If this sounds like your family, you may still be worried about whether you really have enough saved for an uncertain future.

Start by reassessing your savings goals. Run through your version of the personal finance factors Feutz mentioned — your job stability and ability to find a new position if you need one, how much you’d be able to reduce expenses if needed and how many people your income supports. Talk through numbers with a trusted financial advisor. You might realize you’d considered your emergency savings “fully funded” with six months’ worth of income, but nine months’ worth is a better reflection of what you might need.

If your emergency savings look good, get other finances in order. Check your life insurance coverage, consider disability insurance and check your progress on long-term savings like retirement and higher education savings for your kids.

If your financial house is in order and you’ve got money to spare, consider sharing with someone less fortunate. Charitable giving is a wonderful family value to teach your kids, and you may be able to contribute a small part toward helping your community recover from the pandemic.

It’s tough to say exactly how long we may still deal with pandemic-related changes to our routine from the “before times.” Developments like a vaccine feel like a hopeful sign that we may see brighter days ahead. In the meantime, save when you can and reach out for help when you need it. 

Even adding one new option to your list can better equip you to ride out a tough financial spot, and help your peace of mind.

Fabric exists to help young families master their money. Our articles abide by strict editorial standards.

This material is designed to provide general information on the subjects covered. It is not, however, intended to provide specific financial advice or to serve as the basis for any decisions. Fabric Insurance Agency, LLC offers a mobile experience for people on-the-go who want an easy and fast way to purchase life insurance.

Subscribe to our newsletter

Written by

Jessica Sillers

Related Posts

Modern Family Finances

Your Winter Checklist: How to Prep Your Finances for the New Year

No time + needing to look after the ones you love = a quarterly checklist to help keep you on track, so you can get back to wiping boogers and giving snuggles.

By Allison Kade
Modern Family Finances

Your Fall Money Checklist: 5 To-Dos

As you get back in the swing of the daily grind, we’ve got some money to-dos to keep your financial life chugging along smoothly.

By Allison Kade
Modern Family Finances

5 Quick Ways to Stay on Top of Your Money This Summer

Summer’s about taking it easy - but also using your breathing room to feel on top of your game. Here are 5 to-dos to keep you on your game.

By Allison Kade

Fabric Picks

Life Insurance

Life Insurance for Millennials

Blame participation trophies or the fact that many millennials entered the job market around the time the Great Recession hit, but millennials sometimes have a hard time shaking a reputation for being stuck in extended adolescence. The truth is, the generation that coined “adulting” as a verb has been grown up for a while now. Most millennials have already seen our 10-year college reunion come and go, or we may face the shock of hearing we’re experiencing a “geriatric” pregnancy (at 35, really?). As your life grows to include more responsibilities and loved ones who depend on you, it’s time to consider whether life insurance might be the right next step.

By Jessica Sillers
Modern Family Finances

When Do We Feel Like an Adult? New Survey Shares ‘Signs’ of Adulting

Top signs of “adulting” include saving money, doing taxes, and signing up for life insurance, according to Fabric’s new research. Read on for more surprising insights.

By Allison Kade
Life Insurance

How to Get Life Insurance

Have you ever envisioned leaving money to your family when you’re gone? Here’s exactly how to go about getting life insurance.

By Melissa Brock

About Fabric




Download Fabric’s iOS mobile app through the Apple App Store
Download Fabric’s android mobile app through the Google Play app store
Subscribe to our newsletter

© 2021 Fabric Insurance Agency, LLC

Accidental Death Insurance policies (Form VL-ADH1 with state variations where applicable) and Term Life Insurance policies (Form ICC16-VLT, ICC19-VLT2, and CMP 0501 with state variations where applicable) are issued by Vantis Life Insurance Company (Vantis Life), Windsor, CT (all states except NY), and by The Penn Insurance and Annuity Company of New York (NY only). Coverage may not be available in all states. Issuance of coverage for Term Life Insurance is subject to underwriting review and approval. Please see a copy of the policy for the full terms, conditions and exclusions. Policy obligations are the sole responsibility of Vantis Life.

All sample pricing is based on a 25-year old F in Excellent health for the coverage amount shown. All samples are for a 10-year term policy, unless otherwise stated. Term Life Insurance policies (Form ICC16-VLT, ICC19-VLT2, and CMP 0501 with state variations where applicable) are issued by Vantis Life Insurance Company (Vantis Life), Windsor, CT. Coverage may not be available in all states. Issuance of coverage for Term Life Insurance is subject to underwriting review and approval. Please see a copy of the policy for the full terms, conditions and exclusions. Policy obligations are the sole responsibility of Vantis Life.

Fabric Insurance Agency, LLC (FIA) is an insurance agency licensed to sell life and accident insurance products. FIA will receive compensation from Vantis Life for such sales. The NAIC Company Code for Vantis Life is 68632. See the Terms of Use for additional information regarding FIA.

A.M. Best uses letter grades ranging from A++, the highest, to F, companies in liquidation. Vantis Life’s A+ (Superior) rating, which was reaffirmed in April 2020, ranks the second highest out of 16 rankings. An insurer’s financial strength rating represents an opinion by the issuing agency regarding the ability of an insurance company to meet its financial obligations to its policyholders and contract holders and not a statement of fact or recommendation to purchase, sell or hold any security, policy or contract. These ratings do not imply approval of our products and do not reflect any indication of their performance. For more information about a particular rating or rating agency, please visit the website of the relevant agency.

Plan like a parent. is a trademark of Fabric Technologies, Inc.