Marketplace has a new podcast for kids, "Million Bazillion!" EPISODE OUT NOW
Makin' Money

The relentless pressure to save

Chris Farrell Nov 14, 2011

One of the national discussions on Marketplace Money is the desire to build up a larger emergency fund. With good reason, as this chart from McKinsey & Co. makes clear.

From 1946 to the 1980s jobs typically rebounded in about 6 months after the economy started improving. The standard advice to set aside 3 to 6 months in savings to meet expenses made sense.

Yet it takes longer and longer for the job market to revive ever since the early ’90s. The consultants at McKinsey project that the lag in job creation this time around could be as much as 60 months—or 5 years. Little wonder a year’s worth of expenses is the savings rule of thumb these days.

But how realistic is it?  I don’t think most people on their own can save enough in emergency savings to tide them through long spells of unemployment and weak job growth. Especially not when we’re also expected to save for retirement, our children’s college education, and pay a bigger portion of our health care bill — and real household incomes fell by 7 percent over the past decade.

Hopefully, the unemployment system gets a major overhaul before the next downturn strikes. Meanwhile, all we can do is to try and steadily save more.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.