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Too few have emergency cash
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December 6, 2001: 5:54 p.m. ET
41% of households aren't prepared for job loss, Fidelity survey finds.
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NEW YORK (CNN/Money) - Almost without exception, financial planners recommend that you set aside three-to-six months' of living expenses in case of job loss. Apparently, a lot of us haven't taken that advice.
Forty-one percent of American heads of households - which translates to 71 million Americans -- do not have an emergency fund, according to a survey released Thursday by Fidelity Investments.
Those without emergency funds listed their family and friends, their savings accounts and their retirement savings as their top three financial fallbacks. The costliest option of the three, by far, is an early retirement withdrawal.
Retirement account holders were aware that they faced taxes and penalties should they tap their IRAs or 401(k)s before age 59-1/2, but 54 percent of them were not aware how much they put at risk, said Fidelity, the No. 1 provider of workplace retirement savings plans.
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 TOP THREE FINANCIAL FALLBACKS
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Americans surveyed who did not have an emergency fund said their top three sources for crisis cash were:
Family and friends
Savings
Retirement Accounts
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In most instances, when you take an early withdrawal, the money is subject to federal, state and local income tax and a 10 percent penalty. What's more, you lose valuable time that would otherwise allow your money to compound.
A 25-year-old who takes out $5,000 will net significantly less after taxes and penalties. Had that $5,000 been left to earn an average 8 percent a year, it could grow to more than $108,000 on a pre-tax basis by age 65.
If you take a loan from your workplace retirement plan, you will have to pay yourself back with interest using after-tax money, thereby missing out on the advantage of tax-deferred savings. And, should you lose your job, you will be required to pay the loan back in full within a short period of time or have it treated as a withdrawal, with taxes and penalties due.
What you can do
If you're looking for ways to help build an emergency fund, you can start cutting costs now and bank the savings. For a few fairly painless strategies, click here.
If you own a home and haven't refinanced in this low-interest rate environment, you may be able to get a lower mortgage rate, and hence pay less per month. But there are several factors you need to weigh. For a look at those factors, click here.
And lastly, if debt payments are the reason you can't build an emergency fund, click here to find out how you can reduce your burden. 
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