Many people face job loss without enough savings to cover their expenses. A layoff fund is money set aside to help you pay bills, buy food, and cover other needs if you lose your job and cannot find work for several months.
To build your layoff fund, first calculate your monthly expenses. Include rent, groceries, utilities, gas, and any debt payments. Also, consider extra costs like health insurance if you lose employer coverage and need to buy a plan on your own or through COBRA.
Experts say you should save enough to cover three to ten months of expenses after a layoff. This may seem difficult, but even small savings add up. You can also try a side job or cut back on non-essential spending like subscriptions and dining out to save faster.
Your emergency fund can double as your layoff fund. If you don’t have one, start saving now. If you already have an emergency fund, consider creating a separate layoff fund for extra security.
Keep your layoff fund in a high-yield savings account. These accounts offer better interest rates—often between 3.5% and 4% APY—compared to traditional savings accounts that pay almost no interest. This helps your money grow while staying safe and accessible. Avoid accounts with monthly fees that can reduce your savings.
For example, saving $100 weekly for six months in a 3.6% APY account can grow to about $2,420, including interest. This is better than a regular savings account where interest is almost zero.
The key is to start saving now and keep your money in a safe, easy-to-access place. This preparation gives you peace of mind if a layoff happens.
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