The First $10,000 is the Most Important

What’s the smallest amount of money that you would consider “life-changing”? Some might say $100,000. Others over $1 million. If you had asked me this question a few years ago, I would have told you something similar.

But today, I’m convinced that the most life-changing amount of money is $10,000—in particular, the first $10,000.

This amount is the threshold that separates Level 1 (<$10k) from Level 2 ($10k-$100k) in my Wealth Ladder framework. And I believe that going from $0 (Level 1) to $10,000 (Level 2) will have a bigger impact on most people’s lives than any subsequent jump up the Wealth Ladder.

I know that might seem far-fetched, but all the data I’ve seen suggests that it’s true. Whether we look at stress levels, depressive symptoms, or other measures of mental health, that first set of emergency savings will do more for you than just about anything else.

To start, let’s examine why wealth is a better determinant of mental health than income.

The Link Between Wealth and Mental Health

Historically, most financial research focused on income and its impact on our lives. For example, researchers might examine the link between income and happiness or income and health. This was done because income data was more readily available and more reliable than wealth data.

However, as financial information has become easier to collect and track over time, the tide has slowly turned toward wealth as a better measure of well-being than income. A study in Scientific Reports concluded as much after looking at the relationship between financial assets and mental health over time:

Wealth, defined broadly as total assets a given person or household has, may better protect mental health than income. Whereas income represents a flow of capital, wealth represents an accumulated stock of capital. Even more than income, wealth represents more holistic access to resources that may improve or protect mental health. Wealth gaps, rather than income gaps, may better describe economic disparities, including intergenerational transfers, that drive access to resources that can then result in differential mental health…A growing literature suggests that wealth is associated with mental health above and beyond income.

Where do these mental health benefits show up? All over the place.

For example, one study found that having less than $5,000 during the COVID-19 pandemic was associated with a 52% higher odds of having depressive symptoms compared to those with more than $5,000 in savings. This wasn’t just a result of the pandemic either. When researchers examined household wealth during 2015-2016, they found that those with less than $20,000 in wealth had 49% higher odds of having depressive symptoms compared to those with more than $20,000 in wealth.

Though these two studies were from different data sources and time periods, there was still a slight decrease in the odds of depressive symptoms as wealth increased.

This suggests that most of the benefit from wealth comes from the initial savings, with subsequent amounts being less impactful. Research from Vanguard released in April 2025 found this to be the case as well (emphasis mine):

Our findings show that having at least $2,000 in emergency savings is associated with a 21% higher level of financial well-being versus not having any emergency savings. Having at least three to six months of expenses saved on top of the initial $2,000 is associated with an additional 13% boost to financial well-being, even after taking into account income, debt type, and financial assets.

While the first $2,000 in emergency savings boosted financial well-being by 21%, an additional 3-6 months of savings (likely more than $2,000) only had an impact of 13%.

You can see this more clearly if you look at how much time people spent thinking about their finances, based on their emergency savings amount (also from Vanguard):

As the chart illustrates, those with no emergency savings spent nearly twice as much time thinking about money compared to those with $2,000 in emergency savings. But, more importantly, those with an additional 3-6 months of emergency savings spent basically the same amount of time thinking about money as those with only $2,000 in savings. The stress-reducing effects of money seem to come on quickly but then drop off after that.

This explains why the COVID-19 stimulus checks were so impactful. People who had little to no emergency savings were finally relieved from constantly trying to make ends meet. A study from the U.S. Census Bureau following the third stimulus check (in March 2021) found the following:

From December 2020 to April 2021, food insufficiency fell by over 40%, financial instability fell by 45%, and reported adverse mental health symptoms fell by 20%.

But it’s not just academic research where we see this. Anecdotally, this seems to be true as well. For example, a social worker tweeted as much earlier this year:

As a social worker I can safely say money (even somewhere around $10k-$20k) would significantly improve most of my clients lives.

The reduced mental burden of going from paycheck-to-paycheck to the smallest resemblance of financial safety is the thing that transforms people’s financial lives the most. Though I’ve never experienced such poverty myself, I’ve seen enough evidence from those who have to suggest that this is the case.

Given this, the most important financial action for most people on Earth today is to escape Level 1 (<$10k).

Escape Level 1 (<$10,000)

While there are technically more people in Level 2 ($10k-$100k) than Level 1 (<$10k) on a global basis today (43% vs. 40%), Level 1 is the starting wealth level for the vast majority. And for those at the beginning of their wealth journey, escaping Level 1 should be their single most important financial goal.

Why? Because getting out of Level 1 fundamentally changes how you experience life. You go from focusing on your next paycheck and dreading your next bill to enjoying your time without worry. Getting out of Level 1 frees your mind so that you can focus on other things. That first $10,000 can bring:

• Stability: You can handle basic emergencies without going into a financial tailspin.
• Confidence: You start to believe in your financial abilities and feel better.
• Momentum: You build the financial habits that allow you to keep climbing The Wealth Ladder.
• Mental freedom: The ability to focus on things other than money.

Truthfully, the $10,000 threshold is arbitrary. In some countries, you can have far less than this and still get these benefits.

But the point isn’t the amount. It’s about escaping financial insecurity. And while most of you reading this are likely in Level 3 ($100k-$1M) and Level 4 ($1M-$10M), you may have people in your life who are in Level 1.  

If you do, help them. Not necessarily with money, but in any way you can. Share a resource. Offer encouragement. Or just talk to them about money without passing judgment. Because the first $10,000 is the most important. And helping them to reach it is the most impactful thing you can do for them financially.

Thank you for reading!

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This is post 463. Any code I have related to this post can be found here with the same numbering: https://github.com/nmaggiulli/of-dollars-and-data

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