11 Easy Ways to Build Your Emergency Fund (2024)

11 Easy Ways to Build Your Emergency Fund (1)

All the bills had been paid and we had everything we needed. We werebroke, but all the important things had been taken care of. Then, a tire blew out on the highway. Thankfully, no one was injured and the car was fine, save for the tire. I was left wondering how to pay for a new one, though. I’m sure many of you have been in a similar situation. I learned the importance of an emergency fund that day and quickly figured out how to build one. Here, I’ll share some of the ideas that I found while building my emergency fund.

Why Have an Emergency Fund?

As I pointed out above, sometimes the unexpected happens. When it does, you want to be prepared. Let’s go over some of the other reasons to build an emergency fund.

  1. Sudden Unemployment

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    You’ve worked at Company X for years when, out of nowhere, the company decides to downsize. Unfortunately,you are among the cuts. Now what? Learnvest.com (@learnvest) points to sudden, unexpected job loss as one of many reasons to have an emergency fund.

  2. Long-term Illness

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    Whether it’s you or your spouse or child, long-term illness comes with medical bills, unpaid time off, and potential job loss. Bankrate (@Bankrate) advises having three to six months of living expenses socked away for this potential event, if possible.

  3. Moving for Work

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    Good news: you’ve been promoted! Bad news: your new position is halfway across the country and your company isn’t shouldering all the expenses of your move. USNews Money (@USNewsMoney) talks about this sudden expense here.

  4. Cost of Living Increase

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    Maybe you’ve moved. Perhaps your lease is up and your landlord increased the rent in your new lease. You can’t afford to move, so you’re stuck. Whatever the situation, cost of living increases do happen. It’s best to be prepared for them, says Get Rich Slowly (@getrichslowly).

  5. Car Trouble

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    As in my situation earlier, you might find yourself on the side of the highway with a car that needs repairs. You shouldn’t have to figure out which bill you’d have to skip this monthjust to pay for the repairs. Smart About Money (@NEFE_ORG) lists car repairs as their number three reason to have an emergency fund.

  6. Death in the Family

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    A friend of mine unexpectedly lost her mother. Because she didn’t have an emergency fund, she could only afford to miss a couple days of work, or risk being unable to pay her bills. This situation arises often, unfortunately. My friend wishes she had socked money away, as Bank on Yourself (@PamelaYellen) advises here.

  7. Home Repairs

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    A leaking roof or burst pipe can happen to anyone. You don’t want to be caught with your financial pants down. Insurance will help cover the cost of things like storm damage, but it won’t always cover the unexpected. This is why MoneyUnder30 (@MoneyUnder30) suggests an emergency fund for that purpose.

How to Build Your Emergency Fund

Now that we know why we should have an emergency fund, how do we go about building it? When you’re struggling to stay afloat, how can you possibly set asidemoney for emergencies?

  1. Take a Look at Your Expenses

    Step one, as The Balance (@thebalance) advises, is to take a look at your expenses. What do you spend money on each month? Compile a list of these expenses, from the essential to the non-essential.

    Now that we have a list, cross off expenses to get rid of. How often do you eat out? Is cable something you really need? If you find this overwhelming, take a page from The Simple Dollar (@thesimpledollar) and get rid of one expense a month. Maybe start by cutting your cable package down to the basics.

  2. Look for Rewards

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    Many credit cards offer cashback rewards, and banks often offer special rewards for their clientele, such as free tickets or a percent back when shopping at certain stores. Get Rich Slowly (@getrichslowly) advises checking your cards for these rewards, and trading them out for ones that do if yours don’t have these options.

  3. Put Away Reimbursem*nts

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    Do you receive reimbursem*nts through work for work-related expenses? Maybe your insurance company reimbursed you a medical expense. Whatever it was from, The Financial Diet (@TFDiet) advises putting it away for an emergency.

  4. Bank Your Coupons

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    When you use a coupon at the store and save $10 on your purchase, sock that money away. Pretend you spent it by transferring it to savings, as suggested by the Bank of America’s Better Money Spending Habits blog (@BofA_Tips) suggests.

  5. Round Up Your Expenses

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    This is a tip my mother gave me when I opened my first checking account. The idea, as USAA.com (@USAA) explains, is for you to spend $5.78, but record that you spent $6 even. At the end of the month, count the money you rounded, and transfer to your savings.

  6. Transfer Cash

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    It’s the day before payday. You check your account and find $98 in it. Lilienews.com (@lilienews) suggests taking part or all of that amount, and sending it to savings.

  7. Make It a Challenge

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    I see many financial savings challenges floating around my social media feed almost daily. Some of them will not work for all, but you’ll likely find at least one worth trying. A few ideas for you:

  8. Bill Yourself

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    You want to save money, right? So, bill yourself. Decide how much you want to set aside each month and create an alarm to remind you to pay yourself, MyMoneyCoach (@mymoneycoach_ca) advises.

  9. Keep the Change Programs

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    Just as many banks offer cash back programs, some also offer a program in which they will round your debit-card purchases up to the next dollar for you and transfer the difference to savings, The Penny Hoarder (@thepennyhoarder) says.

  10. Name Your Dollars

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    Giving your account(s) a named purpose, like “Home Repairs” or “New Car”, can help motivate you to leave that money in the account, no matter how much you want that new Keurig, says Automatic Finances (@autofinances).

  11. Choose an Online Bank

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    Go Banking Rates (@GoBankingRates) suggests online banking for savings accounts, as there are few or no requirements for minimum balances, fees, or other costly expenses associated with more traditional banks.

Now that I’ve made an emergency fund, the unexpected is no longer a reason to panic. I hope this guide helps you to build your emergency fund, too. Are there any tips or tricks that you’ve used we didn’t include here? Let us know in the comments below, and don’t forget to share with your friends and family so they can get started, too.

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11 Easy Ways to Build Your Emergency Fund (2024)

FAQs

How to build an emergency fund quickly? ›

7 easy steps to get your emergency fund started
  1. Make a budget and see where you can start saving more money. ...
  2. Determine your emergency fund goal. ...
  3. Set up a direct deposit. ...
  4. Gradually increase your savings. ...
  5. Save unexpected income. ...
  6. Keep saving after reaching your goal. ...
  7. Use a bank account bonus to jumpstart your savings.
Feb 29, 2024

What is the 50 30 20 rule? ›

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

What are the 6 simple steps to jump starting your emergency fund? ›

Six Simple Steps to Jump-start Your Emergency Fund
  1. Take it day by day. Putting aside months' worth of living expenses might seem like an impossibly tall task. ...
  2. Pick something and cut it. ...
  3. Make it easy on yourself. ...
  4. Don't let debt get in the way. ...
  5. Keep your funds accessible—but away from temptation. ...
  6. Now, up the ante.

What are some ways you can start saving your $500 emergency fund this month? ›

9 Easy Tips to Get Started
  • Determine how much you need to save. ...
  • Decide where to store your emergency fund. ...
  • Set up a budget. ...
  • Automate your savings. ...
  • Cut back on unnecessary expenses. ...
  • Make extra money by picking up some freelance work or taking on a part-time job.

How much cash should I keep at home? ›

In addition to keeping funds in a bank account, you should also keep between $100 and $300 cash in your wallet and about $1,000 in a safe at home for unexpected expenses.

What is a good starter emergency fund? ›

Starter emergency fund: If you have consumer debt, you need a starter emergency fund of $1,000. This might not seem like a lot, but it's just a temporary buffer while you pay off that debt. Fully funded emergency fund: Once that debt's gone, you need a fully funded emergency fund of 3–6 months of expenses.

How to budget $5000 a month? ›

Consider an individual who takes home $5,000 a month. Applying the 50/30/20 rule would give them a monthly budget of: 50% for mandatory expenses = $2,500. 20% to savings and debt repayment = $1,000.

What are the four walls? ›

In a series of tweets, Ramsey suggested budgeting for food, utilities, shelter and transportation — in that specific order. “I call these budget categories the 'Four Walls. ' Focus on taking care of these FIRST, and in this specific order… especially if you're going through a tough financial season,” the tweet read.

How much should a 30 year old have saved? ›

Fidelity suggests 1x your income

So the average 30-year-old should have $50,000 to $60,000 saved by Fidelity's standards. Assuming that your income stays at $50,000 over time, here are financial milestones by decade. These goals aren't set in stone. Other financial planners suggest slightly different targets.

How do I maximize my emergency fund? ›

Goals-Based Planning: Stay on Track
  1. Consider using a basic savings or money market account. ...
  2. Look for an account that pays you back. ...
  3. Save enough to cover three to six months of expenses. ...
  4. Start small. ...
  5. Only tap the account for true emergencies. ...
  6. Replenish the account if you draw on the funds.

What is the formula for emergency fund? ›

Calculate Your Monthly Expenses

Multiply this total by the number of months you would like to have covered by your emergency fund. For example, if your monthly expenses are $3,000 and you want to save for three months, your emergency fund goal would be $9,000.

What are five examples of reasons you may need an emergency fund? ›

We've all experienced unexpected financial emergencies—a fender bender, an unexpected medical bill, a broken appliance, a loss of income, or even a damaged cell phone. Large or small, these unplanned expenses often feel like they hit at the worst times.

What does the 60/20/10-10 rule represent? ›

Put 60% of your income towards your needs (including debts), 20% towards your wants, and 20% towards your savings. Once you've been able to pay down your debt, consider revising your budget to put that extra 10% towards savings.

What is the 50 30 20 budget rule? ›

Key Takeaways. The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).

How to build a 6 month emergency fund? ›

Steps to Build an Emergency Fund
  1. Set several smaller savings goals, rather than one large one. Set yourself up for success from the start. ...
  2. Start with small, regular contributions. ...
  3. Automate your savings. ...
  4. Don't increase monthly spending or open new credit cards. ...
  5. Don't over-save.

How long should it take to build an emergency fund? ›

While many financial experts recommend that an emergency fund contain three to six months of your living expenses, Boneparth prefers to be more conservative: He recommends socking away six to nine months of your living expenses.

Is $20000 enough for an emergency fund? ›

While $20,000 may be more than what many Americans have in savings, it's not guaranteed to be an adequate emergency fund for you. Your emergency fund should be set up to cover at least three full months of essential bills. If your monthly expenses are high, you may need to save more than $20,000.

Is $5,000 enough for emergency fund? ›

Saving $5,000 in an emergency fund can be enough for some people, but it is unlikely sufficient for a family. The amount you need in your emergency fund depends on your unique financial situation.

Is $10,000 too much for an emergency fund? ›

Those include things like rent or mortgage payments, utilities, healthcare expenses, and food. If your monthly essentials come to $2,500 a month, and you're comfortable with a four-month emergency fund, then you should be set with a $10,000 savings account balance.

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