Invest in You: Ready. Set. Grow.

How to build a cash reserve if coronavirus causes you to miss work

Getty Images

As people in the United States prepare for the coronavirus to spread, many are hitting the grocery store to stock up on supplies.

However, what most Americans lack is enough cash on hand to weather a storm.

Emergency provisions aside, the majority, or 54%, of adults in this country are not financially ready for a COVID-19 outbreak, according to a report from Prudential Financial.

More from Invest in You:
Avoid this investing mistake as coronavirus fears grip markets
Here's the secret to multiplying your savings
Save $1,000 without sacrificing anything you really love

Nearly half of adults are worried that they will personally contract the coronavirus and fear quarantines will prevent them from working and getting paid, Prudential found.

Roughly 45% are also concerned about investment and retirement savings losses, a number that is up sharply in recent days. (The spread of the coronavirus helped to sink the Dow Jones Industrial Average on Monday, on pace for its worst day since December 2008.)

"Uncertainties in the wake of crises like the coronavirus underscore the need for emergency savings and income protection, yet many workers fear for their financial security," said Jamie Kalamarides, president of Prudential Group Insurance. 

Many workers fear for their financial security.
Jamie Kalamarides
president of Prudential Group Insurance

Missing work in the weeks ahead could be financially devastating.

In its 2020 Financial Planning Survey, First National Bank of Omaha in Nebraska found that 49% of U.S. adults expect to be living paycheck to paycheck this year and 53% do not have an emergency fund that covers at least three months of expenses.

Just more than 40% of Americans are able to cover an emergency room visit or other unexpected $1,000 expense with their savings, according to a separate financial security survey from personal finance website

"The number-one financial regret among Americans tends to be the failure to save for emergencies and for retirement," said Mark Hamrick, senior economic analyst at Bankrate. "This is a time when both of those objectives are quite relevant."

How to build a cash reserve

Most financial experts recommend stashing at least a six-month cushion in an emergency fund — and more if you are the sole breadwinner in your family or in business for yourself.

To get there quickly, scale back your spending or switch to a debit card temporarily to keep purchases in check, then set up a direct deposit from your paycheck into a dedicated savings account.

To make the most of that money, snag a significantly higher savings rate by using a high-yield account.

How to make a budget
How to make a budget