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How to start an emergency fund, even if you think you can’t

What we'll cover

  • How much you should save in your emergency fund

  • Different types of accounts where you can keep your emergency fund

  • Tips to help you add money to your fund and resist pulling from it

If you’ve made it to this blog post, congrats! You’re already taking the first step in building your emergency fund. Starting can be the hardest part of achieving any goal, but it can feel even more difficult if you don’t know where to begin or feel stretched thin when it comes to your finances. While it might seem hard, starting your emergency fund now will help you stay out of debt or keep you from going further into it when you’re met with a surprise expense. Whether you're unsure how to get started, already paying off debt, have uncomfortably high living expenses, or are earning a paycheck that you wish were bigger, read on for how you can start an emergency fund today.

Build an Emergency Fund: Step by Step

Being smart about the way you save can help you grow your savings faster. Set yourself up for saving success by following these moves.

  1. Figure out how much you should have saved.

  2. Choose the best place to keep your emergency fund.

  3. Find easy ways to add money on a regular basis.

  4. Know when to use your money.

How much should you have saved for emergency fund?

When it comes to emergency funds, one size does not fit all. The amount you should save varies from person to person and depends on your income, monthly costs, and if you have any dependents. The rule of thumb is to save three to six months’ worth of expenses (though you can always save more), but you can evaluate your job security and number of dependents to help you determine the right number for you. Knowing how much you need to save in your emergency fund is the best place to start.

Where should you keep your emergency fund?

In an emergency, you will likely need to have immediate access to your emergency fund savings. So, while you’re shopping around for the best account in which to store your emergency fund, you’ll want to find out how easy it is to access your savings in the event you’ll need to use it.  Here is a list of various accounts to consider to when choosing the right place to store your emergency fund.

Types of Accounts for Emergency Funds
Account Account Description
Certificate of Deposit (CD) A certificate of deposit offers a fixed interest rate on your savings, but it is harder to access your money in one. If you withdraw your money before the agreed upon term, you will likely have to pay an early withdrawal penalty.
Savings Account A savings account allows to grow your money and easily access it, typically without a fee. Online savings accounts also offer competitive annual percentage yields (APYs). There may be limited withdrawals each month, but you could transfer funds into your checking account to write checks.
Checking Account Your checking account allows you to access your money whenever you would like, but you might not earn any interest (or the interest rate might be low). Also, depositing your emergency fund in your checking account may blur the lines between the money you’re saving and the money you’re spending, making it easier to fritter away your savings.
Money Market Account A money market account pays interest and provides easy access to your funds. But you may have to maintain a minimum balance to avoid maintenance fees, plus you’re only able to make a few withdrawals each month — making it difficult to pay for a financial emergency if it involves numerous bills.
Investing Account Investing your money in stocks, bonds and mutual funds has the potential to increase your returns, your assets won’t be easily accessible and you also risk losing money.

Smart tools to help you save more: Establishing an emergency fund bucket within our Online Savings Account helps you visualize your financial goal, encouraging you to boost your fund’s balance and giving you a clearer picture of how you’re progressing toward your saving goal. Keeping your emergency fund in its own digital envelope can prevent you from dipping into your savings for non-essential expenses. And the buckets feature eliminates the need to do mental math (whew!) with regards to how much savings you have in your emergency fund versus other savings.

Find easy ways to add money on regular basis.

Once you calculate how much you should save for your emergency savings account, the amount may make you raise your eyebrows (or begin to sweat). So, start by setting a small, realistic goal. Boosting the balance of your emergency fund doesn’t have to be a daunting task. Try these tips:

Start small:  Instead of focusing on how much you want to save in total (or in a year), have a weekly savings goal. For example, if you’re hoping to build an emergency fund that contains $4,000, aim to put $75 a week into savings. ($4,000 divided by 52 weeks = approximately $75 a week.) Once you start consistently hitting your weekly savings target, you’ll feel like your overall goal is much more attainable.

Hold on to your spare change: Microsaving is as cool as it sounds. And it’s a simple way you can start building an emergency fund. All you need to do is set aside small amounts of money — serious, just $2, $5, or even 50 cents — for saving. These tiny contributions may seem insignificant, but over time, they really add up (and help build a savings habit). You can use our Surprise Savings booster to microsave. Or get into the microsaving habit by collecting all of your loose change after each purchase and putting it towards your emergency savings.

Make it automatic: Let’s be honest, life is hectic. When you activate recurring transfers in your Online Savings Account , money will be automatically transferred from your checking into your emergency fund on your schedule — and you won’t have to remind yourself to do it. Another automated trick for building your emergency fund is to have your employer pay your savings first by automatically depositing a portion of your paycheck into savings. Added bonus: When the money isn’t in your checking account, you’ll be less tempted to spend it.

Do more than one thing: Deciding to wait to build an emergency savings account until you pay off all of your debt is not in your best interest, no pun intended. It may seem intimidating to pay down debt and save simultaneously, but it’s important to balance your debt while saving at the same time. Work to put some money aside while paying down your credit card debt, a car loan, or student debt. (Look at the interest rates and if possible, pay off the debt with the highest rate first.) If an unexpected expense comes along, you’ll have money in your emergency fund to help handle it, as opposed to going that much more into debt.

Deposit windfalls: Receiving a tax return, cash gift, or inheritance may inspire you purchase those splurge items you repeatedly put in your online shopping cart. But before you let that money slip through your fingertips, give yourself the gift of financial health by using it to set your emergency fund saving in motion.

Visualize and stay positive: Thinking that you are going to start saving for emergencies can actually help you get there. Really. Imagining yourself saving a portion of your paycheck or how you will feel when reach your emergency fund goal can inspire you to build that emergency fund. Even if you hit a few bumps along the road, maintain a positive attitude about saving to keep your savings habit intact.

Look for new opportunities to earn extra money: If it’s virtually impossible to find funds to save within your existing budget, help jumpstart your emergency savings fund by identifying new ways to make money at home . If you have the time, consider getting a part-time second job. Look on job search sites, like Indeed, to find a job that matches your skillset. Or take a close look at your lifestyle and see if you can make small swaps to cut costs. For example, you could make your own lunch or cancel one of your streaming services.

Know when to use your money.

Determining the right situation to use your emergency fund can help you save it for when you need it most. Before dipping into your emergency savings, ask yourself:

  • “Is this expense urgent?”

  • “Is this expense necessary?”

  • “Is this expense unexpected?”

If you answer yes to at least two of those questions, you are most likely dealing with an emergency and should use your funds to pay for the expenses. The main goal of these questions is to make sure you don’t use your savings for something that isn’t an emergency. While it isn’t a good idea to use your emergency fund to pay for that trip you’ve always dreamed of or to purchase a new TV to watch the big game, you can create different savings buckets for those goals!

Starting an emergency fund is the first step toward a more secure financial future. You may think you don’t have the ability to put money aside right now. But the key takeaway is that you can start small and over time, grow your savings to meet your emergency fund goal. Try one (or several of these tips) to start today.

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