I remember when I was a part of a mass layoff. I was in my early 20s with three months of severance and no idea how I’d land a new job before the checks stopped rolling in. I didn’t have much savings stashed away, and an emergency fund hadn’t ever occurred to me. 

With job cuts on the rise and recession risks still high, CNET recently covered how to prepare for a layoff. One of the most important takeaways is to build an emergency fund while you’re still employed. I’d recommend a layoff fund, too. 

If you lose your job, you want peace of mind that you’ll be able to cover necessities like housing, food and bills — even if you end up receiving severance or unemployment benefits. A layoff fund is money set aside in case you’re out of work for several months or more than a year. After you commit to saving, you’ll want to stash that money in the right place. Here’s my take. 

What your layoff fund should cover

To start building your layoff fund, look at your personal circumstances. Factor in the monthly expenses you cover now, accounting for everything from groceries and rent to gas and utilities. Also, consider how you’ll pay off debt or any new expenses that might come up. 

For example, if you’re currently receiving health insurance through your employer, you might have to enroll in a marketplace health care plan or jump on a family plan. If you’re able to continue your employer’s health insurance coverage through COBRA, you’ll need enough money to cover that cost out of pocket.

Save several months of expenses in your layoff fund

Saving a large amount of money to stay afloat for an entire year can feel impossible, especially if you’re living paycheck to paycheck. But every small bit of savings while you’re still employed can help later if you lose your job. Consider automating contributions from your checking account to your savings fund so you don’t even have to think about it. 

If you have extra time or resources, a side hustle or part-time job can help you shore up your layoff fund. Also, look at what you can cut from your budget now, like subscription services, dining out or even vacations. 

Keep your layoff fund in a high-yield savings account

You never know when you’ll be laid off, so you’ll want your funds to be easily accessible and liquid. I recommend a high-yield savings account for your layoff fund. 

Here’s why: With an HYSA, you’ll earn interest on the money you’re setting aside. Currently, many online-only banks have annual percentage yields between 3.50% and 4% APY, which can help you get better returns on your money than a traditional savings account. 

For instance, if you deposit $100 into an HYSA now, and contribute $100 a week for the next six months, you’ll have saved an additional $2,400. If the account has a 3.6% annual percentage yield, you’ll earn close to $20 in interest, bringing your balance close to $2,420. 

That might not seem like much, but if you make the same deposits into a traditional savings account with a 0.02% APY, you’ll earn only pennies in interest. Also, make sure you’re not losing money by paying a monthly maintenance fee on the account. 

Savings rates are variable, so how much you earn in interest could change over the next several months. 

Regardless of the APY, what matters most is saving what you can now to prepare for the unexpected.