Ways to save extra cash to deal with economic uncertainty

You have no control over the volatility in financial markets or the economic tumult caused by President Donald Trump's tariff policies.

- Ann Carrns

But you can prepare for financial potholes by bolstering your rainy-day fund.

"Emergency savings is one of the single best predictors of a person's financial well-being," said Mr Stephen Roll, co-director of research and policy innovation at the Centre for Social Development at Washington University in St Louis, where he studies economic security.

"Nobody can predict what's going to happen," said Mr Ramit Sethi, the author of personal finance books, including Money For Couples. "I'm hoping everything goes well." But in case it doesn't, he said, it's wise to create a cash cushion.

HOW MUCH SHOULD I SAVE IN AN EMERGENCY FUND?

Vanguard, the big mutual fund company, suggests setting aside US$2,000 (S$2,600), or half of one month's expenses, whichever is greater, as a buffer to cover unexpected but common "shocks", like a car or home repair or medical bill. Then, to protect against a possible job loss, it suggests continuing to save to build a buffer of three to six months of living expenses so you can pay your bills while looking for another job. (The average span of unemployment was just under six months, according to the latest US jobs report.)

With roughly US$2,000 on hand, people can generally cover unforeseen costs without resorting to credit cards, which carry double-digit interest rates, said Mr Paulo Costa, a senior behavioral economist at Vanguard who is also a certified financial planner. "The initial US$2,000 is really what makes a big difference," he said, by helping people avoid becoming financially derailed by common, if unanticipated, expenses. "Having it when you need it provides people with a lot of peace of mind."