Figure Out a Reserve for Unemployment

To protect yourself you need a reserve, usually about 2-4 months’ pay.


Unemployment Happens

So You Need to Be Prepared

Unemployment spells typically last 2-5 months. But in 2011 the average spell lasted 9 months.

One month’s earnings in reserve can usually cover two months’ of unemployment.  That’s because:

  • Most states pay unemployment benefits equal to half your paycheck – up to a monthly maximum and a maximum number of months.
  • You’ll lose benefits, like health insurance, but will tighten your belt, cut saving, and put off deferrable expenses.

A rule-of-thumb: As unemployment spells typically last 2 to 5 months, have 2 to 4 month’s pay in reserve.   

One Size Might Not Fit All

Enter Your Information for a Personalized Estimate

2-earner households & households with low fixed expenses need less

  • If either is unemployed you’ll typically still have the other paycheck.
  • If you spend a lot on discretionary items, save a lot, or can postpone big expenses, you don’t need as large a reserve.

High-earners, single people, and workers who’ll have a hard time finding a job need more

  • If you’re a high earner, unemployment benefits replace less of your earnings.  That’s because benefits are capped – generally at half the wage of your state’s “average earner.”
  • The longer it would take to find a job the larger reserve you need – benefits are generally limited to six months, or nine months in recessions.

Please fill all required fields
    header-small Your Current Monthly Income         
    input Your Take-Home Pay   
    input Your Spouse's Take-Home Pay  
    input results-small What You Could Cut if NecessaryUnsure? See our 6 minute budget. 
    total What You'd Need if Unemployed  
    header-small What You'd Need from Your Reserve   
    header-small What You'd Have if the Higher Earner is Unemployed  
    input results-small Unemployment Benefits  
    input results-small Lower Earner's Take-Home Pay  
    input results-small Other Income  
    total Total Income While Unemployed  
    header-small The Reserve You'll Need   
    text We assume unemployment benefits run out after 6 months, which is standard in "normal" times. You can change this and other assumptions in Advanced.
    billboard-small 3 Month Unemployment Reserve 6 Month Unemployment Reserve 9 Month Unemployment Reserve 
    header-marker Advanced  
    header-orange How We Estimate Your Unemployment Benefits 
    header-small Enter Your Figures to Change our Estimates.   
    text (You can get the rules for your state on the Internet)  
    header-column  Your Figures Estimate 
    input results-small Yearly Earnings of Higher Earner*  
    input results-small % of Earnings Replaced by Unemployment Insurance  
    input results-small State Maximum Weekly Benefit 
    input results-small Your Weekly Benefit  
    input results-small Your Monthly Benefit  
    input results-small Your Tax Bracket 
    input results-small Your Monthly Benefit After Tax  
    input results-small Months of Benefits 
    text-bullets *Unemployment benefits are based on before tax earnings - we estimate this using your take-home pay. If our estimate is incorrect, you can enter your before tax earnings here. 
    text-bulletsClick here to find your State's unemployment benefit 
    text-bulletsClick here to find your marginal tax rate 
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    Peace of Mind

    Not Just for Unemployment

    Your unemployment reserve is a multi-purpose rainy day fund that can help you:

    • Pay for an unexpected expense
    • Lower insurance premiums by taking on a higher deductible
    • Deal with a short term disability

    To see how your reserve fits in with other financial goals, try Build A Better Tomorrow.


    The information provided on the SquaredAway website is for educational purposes only.  It is not intended to provide personal financial advice.