How To Build An Emergency Fund

If you’re reading this, I’m going to guess that you don’t yet have an emergency fund.  And you may be wondering how in the world do I save up an emergency fund if I can barely pay my bills as it is?

I think it’s important to say up front that you will have to make some sacrifices and adjust your lifestyle to some degree.  So, you’ll need to determine if having the security that an emergency fund brings is worth the work to build one for you.

The statistics for the number of U.S. adults that have emergency funds is alarming.  According to, nearly 1/3 don’t have any emergency savings, and only 18% of Americans say they can live off their savings for 6 months.

There are a number of factors that contribute to these numbers.  One of those is the increase of household costs without the income to support that increase.  And if you are living paycheck to paycheck, you are at an even greater risk of getting deeper in debt whenever unexpected expenses arise.  The more debt you have, the less you can save.

In this post I want to encourage you to start building an emergency fund, no matter where you’re at in your finances.  If you’re feeling discouraged because you can’t see how you’ll do it, keep reading.  I’ll tell you how to build an emergency fund, set a time frame, and determine the amount of savings you’ll need.


How much savings you’ll need

When you think about an emergency fund, what do you think you’d use it for?

It’s nice to have a financial cushion for things that come up unexpectedly.  Maybe one of your kids gets hurt and you have to take her to the ER.  Or your car decides to break down and you have to take it to the mechanic.

Life happens, and an emergency fund keeps you from having to pull out your credit card and go deeper in debt.

But what if you or your spouse lost a job?  Or what if one of you gets seriously hurt in an accident and can’t go to work?

These are extreme circumstances, and you never know when they could happen to you.  This is when an emergency fund can protect you from a full, blown-out crisis.

So, when you think about how much you’ll need, bigger is better.  Like, 3-6 months big.  Consider the worst case scenario and prepare for that.

But remember, your “emergency” budget will look different than your regular budget.  If you lose your income, you’ll be cutting out any unnecessary expenses while you look for a new job.  You won’t need a restaurant budget or a shoe budget, because you’ll want to save your money for only what’s necessary.

So, if you typically live off $5,000 a month, you may be able to live off only $4,000 when you’re using your emergency savings.

How many months you want to cover with your savings will depend on your personal circumstances.  If you lose your income but you know you can find a similar job with comparable pay fairly quickly, you may be comfortable with a 3-month savings fund.  But if your profession is not particularly in demand or focused on a small market, you would do better to save for a 6-month fund.

Of course you would consider any other income that is still being generated.  If your spouse’s job provides a significant income, you wouldn’t need as much in savings.  But if you are the sole provider, you will definitely want a bigger cushion.

To set a target number, you’ll need to plan out an emergency budget.  How much money would you need to cover all of your necessary expenses, taking into account any additional income, for one month?  Be ruthless with cutting out all unnecessary spending.  Then, multiply that number by the number of months you feel comfortable covering.  That will be your target emergency fund savings.

Just a warning:  the number will seem enormous and impossible to reach.  But don’t focus on that right now.  The important thing is that you have a goal, and you just have to start moving towards it.


How long it will take to save your emergency fund

Obviously, I can’t give you a specific time frame.  But what I do want to say is take as long as you need.

Yes, the progress will probably be painfully slow.  Especially if you only have $25 a week to put in your fund.  But don’t let that keep you from saving.  Over time, all of those little contributions will build up and you’ll be encouraged with your progress.  Just don’t stop.

Figure out what motivates you.  If a deadline is more motivating than burdensome, set a date you’d like to reach your goal.  Then, work backwards to figure out the average amount you’d need to save every month to reach it on time.

But if you’d rather just take a certain amount or percentage out of your paycheck, commit to that.  You don’t need a deadline, you just need to be consistent.  Take out the decision process by setting up a direct deposit into a separate savings account so you never see the money.

Don’t focus on how little you can save or how long it will take, because the reality is that your current circumstances only apply to today.  You don’t know what tomorrow brings – if you’ll get a raise or some other windfall that will turbocharge your progress.  Maybe you’ll find a side job that will multiply your savings.  Or you’ll decide to sell a vehicle and put the proceeds in your fund.

Things will come up along the way that can speed up your progress.  But because you don’t know when or how, just be committed to what little you can do today.  If you don’t start, you’ll never experience progress.  And if you’re not consistent with saving, then you won’t be consistent with progress either.

So, just start, and then keep going.  If you keep adding money to your emergency fund, eventually you will reach your goal.


Where to find money to save

Most people have money to save, they just spend it before they can.

Find the money you can save by setting up a budget and tracking your money for a month or two.  Get a really good handle on where your money is going and why.

You will likely find “budget leaks” that are draining money away from your savings goals.  Some of these you can eliminate completely, others you may be able to reduce.

Remember, finding extra money in your budget when you’re used to not having any requires some changes.  You might decide to quit the gym and work out at home instead.  Or cut out cable and just use a streaming service.  If you’re really motivate to build up your emergency fund, you could choose to sell a vehicle or refinance your mortgage to a lower payment.

In addition to finding the money already in your budget, you can also choose to generate more income.

  • Turn your hobby into a service that others will pay for
  • Get a part-time job at your favorite retail store
  • Offer consulting if you have a lot of experience in a certain field
  • Find a side gig through an online service like Upwork or Fiverr
  • Rent out a room in your home
  • Sell stuff online through eBay or Craigslist

The money is there to make, you just have to be willing to sacrifice the time and energy to make it.  If you feel like you don’t have either, consider starting small.  Find one or two hours in your week to tutor, or drive, or post ads to sell stuff.  Even if you only make an extra $20 a week, that’s more money to add to your fund.

Besides, when you open yourself up to opportunities to make more money, you may find an interest that could turn into something more lucrative.  Be open to possibilities you can’t even imagine right now, because you never know what the future may hold.


Set your target and be persistent

So many times we limit ourselves because of an unhealthy mindset towards money.  We get stuck in the belief that our situation will never change, that our income is fixed, that we’ll never get out of debt.

But these are just thoughts, and they aren’t based on fact.  You may not be able to control your circumstances, but you can control how you respond to them.

You can choose to make changes, make sacrifices, and create better habits.  These things take time, so don’t be discouraged by slow growth.  Any growth is progress, and puts you in a better spot than you were before.

Every step you take toward your savings goals is one step closer to a life of financial freedom.  It may take you 5, 10, maybe even 20 years to reach your target.  But if you’re consistent and persistent, you will get there eventually.

In other words, if you just keep moving forward, your success is inevitable.

Wouldn’t you like to be successful 10 years from now, rather than in the same situation you’re in today?

So *start* – and don’t stop.  You’ll get there, I promise.


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Woman putting money in jar with text overlay: How to build a fully-funded emergency savings account

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