Geopolitical tensions, open conflicts and global economic uncertainty are once again putting half the world under tension. The prolongation of the war in Ukraine, the war in the Middle East and the new trade policies between great powers keep markets and families on alert. In fact, the effects are already being felt in assets as important as oil, which have multiplied their value after the closure of the Strait of Hormuz. Added to this are increasingly frequent extreme weather events, which also leave the economy trembling. Given this scenario, concern is growing about how a possible recession may affect the homes and pockets of citizens. For this reason, personal finance experts insist on the importance of having an emergency fund. According to specialists, this mattress should cover between 3 and 6 months of basic expenses.
In Spain and Europe, although the economy has shown some resistance in recent months, forecasts are beginning to moderate given the international context. Organizations such as the Bank of Spain have already warned of a possible downward revision of growth if global uncertainty persists, marked by rising energy prices, inflation and trade tensions. The ECB, for its part, has maintained rates despite the conflict. This scenario has reactivated the debate on the need to reinforce family savings to face possible economic unforeseen events.
Given this new scenario, it is worth considering how these economic changes can impact personal finances. Although these macroeconomic movements are not immediately reflected on a day-to-day basis, they can reduce the purchasing power of households in the coming months. One of the most widespread recommendations among specialists is to have an emergency fund. In statements reported by Business Insider, five home economics experts explain how it is possible to build an emergency fund with planning in case an economic recession occurs due to war or an environmental catastrophe. They also explain in detail how much money the financial cushion that we prepare must be.
How much money should you save for an emergency mattress?
As the experts explain in a recent interview for the media Business Insiderthe emergency fund that we must prepare must be made up of at least the money corresponding to 3 or 6 months of normal expenses. Although other financial advisors change this position a little, defending that it is better to have 3 to 6 times the average salary of a person, to cover the costs of losing a job suddenly due to a generalized crisis.
For many people, saving an emergency fund can be difficult. In 2023, the average expenditure per household in Spain was 32,617 euros, 3.8% more than the previous year. This would imply that an adequate fund would have to be between 8,000 and 16,000 euros, which is not easy to achieve.
However, Ramit Sethi, author of the book I Will Teach You To Be Rich, believes that this figure may be excessive, since in difficult times there is a tendency to reduce unnecessary expenses, such as going out to eat or buying clothes. Instead, he recommends calculating your emergency fund based on the minimum expenses needed to cover the essentials, or as he puts it, “keeping the lights on.”
How to prepare your emergency fund for a crisis
Although a recession has not yet occurred, experts agree that now is the right time to strengthen personal financial health before more difficult times arrive.
One of the first recommendations is not to become obsessed with high numbers. Financial advisor Andrea Woroch advises starting by saving the first 1,000 euros, a more accessible goal that can motivate you to continue.
To achieve this, identifying large expenses is essential. Jeremy Schneider, founder of the Personal Finance Club, points out that many people focus on small cuts like subscriptions, but the real savings are on larger expenses, like a car or a home. Downsizing, sharing an apartment, or selling a barely used car are effective strategies for downsizing significantly.
A practical example is offered by a couple who decided to give up their second car, realizing that just one car covered all their needs. This measure allowed them to significantly alleviate their monthly expenses and allocate that money to the emergency fund.