Posted by Mike Smith :: March 5, 2009 @ 5:46 am

It’s easy to allow yourself to become content with an emergency fund towards the low end of the recommended 3-6 months’ worth of expenses, but in times like these, increasing your fund to the higher end of that range may be more prudent. A number of factors contribute to this rationale.

First, the main reason many of us need to use our emergency fund is the loss of a job. With unemployment on the rise, the likelihood of job loss is greater. What’s more, with so many people out of work it will likely take longer for you to find a suitable replacement job. You may even need to settle for a lower paying job. Both scenarios, a longer period of unemployment and lower future income, would benefit from a better-funded emergency fund.

Second, alternative investments look less attractive at the moment. It’s hard to fund your emergency fund when you could be making massive gains in the stock market or investment real estate. With such alternatives sustaining heavy losses of late, many people are wondering where to park their money. Increasing your emergency fund won’t result in large gains, but it shouldn’t suffer any losses either.

Lastly, the slow economy has increased everyone’s money consciousness. Joining the crowd and trying to save money now, even if you don’t feel that you need to, may be easier than ever. Discounts on products and services, intended to aid ailing consumers, can be used for your benefit as well.

When difficult times hit others but not you, it can seem as though maintaining the status quo will allow your relative good fortune to continue. In reality, this situation is a warning to prepare for the possibility that you too may soon face financial difficulty. Now is an excellent time to increase your emergency fund and a decision that may seem very smart should those funds be needed in the near future.

How long would your emergency fund last?