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How to Build an Emergency Fund
5 Suggestions for Growing Your Savings


Having extra money in the bank for an emergency must be an essential part of anyone’s financial plan. That extra cushion helps you breathe a little easier. But getting there can be the problem. It’s intimidating to think of saving when you’re trying to make ends meet and still enjoy life.


This article will discuss the basics of an emergency fund and provide practical ideas on how to build one so you have the savings when you need it.


What is an emergency fund?


An emergency fund is a savings account set aside for unplanned expenses like medical bills, home or vehicle repairs, or even a job loss. Most financial experts suggest starting with $1,000 in the bank (more on this below).


It should go without saying that this money is only for emergencies. Buying the latest iPhone when your current phone is in good condition doesn’t qualify as an emergency. Do you want to pay cash for a phone or car or something else? Start a new savings account (that’s for another article).

Where do I keep an emergency fund?


You can keep your emergency fund in a high-interest savings account, a basic savings account, or a money market account that comes with a debit card. Because you’ll need the money in an emergency, you want it to be accessible on short notice.


But you don't want it too accessible so that you aren't tempted to use it on non-emergencies. Don't keep it in your checking account or a savings account linked to that checking account.

Why do I need an emergency fund?


Have you ever heard the phrase “life happens”? It’s not just a cliché. It’s true.


And when life happens, it usually costs a lot. That’s why you want to be prepared.


A recent survey revealed 60% of Americans can’t afford a $1,000 emergency. Back in 2018, some 40% of Americans couldn’t pay for a $400 expense.


The most common emergencies Americans experience are vehicle, home, and medical emergencies. And it doesn’t take much to get $1,000 when you’re replacing major home appliances, auto parts, or dealing with a broken bone.


How much do I need to save?


An emergency fund should start with $1,000 for basic needs like the ones mentioned above. Once you get to $1,000, the next step is to save three to six months of your regular expenses.


The important thing to remember is you are saving for expenses, not to replace income. If you make $3,000 per month but only spend about $2,500, then you know three months’ worth is $7,500.


Your specific needs will be different depending on your situation and stage of life. If you are a recent college grad and single, you may only need three months’ worth. If you own a business or depend on commission, consider saving six to twelve months of expenses.


What are the benefits of an emergency fund?


The first benefit of having an emergency fund is that you won’t need to take out a loan or rack up debt on a high-interest credit card. You’ll be able to pay cash and move on with your life.


This leads to the second, and most important, benefit. Peace of mind.


When you have money stashed away, you won’t panic when the furnace stops working, a child breaks a bone, or you get in a car accident. Your savings brings financial stability to your life. When life happens, you want to focus on the relationships you have with the people in our life, not money.


When you see it this way, an emergency fund enhances your emotional and relational well-being. It’s one of the primary ways you can care for yourself and your loved ones.


Money can’t solve all your problems in life. But not saving can bring up many other problems that make life difficult.


5 Ways to Help Build an Emergency Fund


It might seem impossible, even unrealistic, to save up six months’ worth of expenses! But with some hard work and intentional planning, you can do it.


The first step to starting your emergency fund is to keep a budget. This way you’ll know what you spend and where you can cut back to save extra. If you don’t budget, it’s hard to know what you would need to cover expenses in an extreme situation like a job loss.


You’ve probably heard advice about how to fund your emergency savings by creating a goal, using direct deposit, and increasing each month. Let’s take it up a notch. Here are five simple suggestions to either save or generate income to help you build your savings.


  1. DIY your food. How often do you get a coffee on the way to work or eat out at lunch? Do you pick up fast food on the way home multiple times per week? Brew your own coffee, follow a grocery list, and cook your own meals at home. Just skipping out on a $5 latte three days per week will save you $60 per month! It makes life harder this way, but the savings will pour in.

  2. Sell some stuff. How’s that storage closet or garage looking? Host a garage sale or post on Facebook Marketplace. Don’t think people will buy your stuff? You won’t know until you try. Not only will your apartment or house thank you for more space, your savings account will, too.

  3. Cancel a subscription (or four!). Rest and way to escape the daily grind is important. But multiple streaming services suck your potential savings dry. Do you really need Netflix, Amazon Prime, Disney+, AND Hulu? And that’s just TV. Consider online publications, music streaming services, fitness programs, and others. Pick one or two to keep. Take the rest that you were spending and save it.

  4. Save your refund. This is the quickest and easiest way to make enormous progress with your emergency fund. Nearly 75% of Americans get a tax refund each year! Last year, the average refund was $2,535. File online and deposit it into your savings account. Contact a tax pro to make sure you’re doing your taxes correctly to maximize your refund. Resist the temptation to take that refund and buy a nice toy. Save it!

  5. Get a temporary part-time gig. This one is the hardest because it only works if you devote time and energy to it. But it’s the quickest way to save. Deliver pizzas or drive for a ride share on the weekends. Become a barista and serve coffee to people who should make theirs at home. It doesn’t have to be forever. But a side-hustle for a month or two will do wonders for your savings.




An emergency fund is a savings account with three to six months’ worth of your expenses. A full emergency fund will not only keep you out of debt, but give peace of mind to focus on the things that matter most in your life. Finally, while it may seem daunting to save that much money, with some planning, hard work, and creative strategies to cut back or earn money, you can do it.

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