How To Build A 6 Month Emergency Fund In 5 Simple Steps

Jar of coins representing how to build a 6 month emergency fund

Why do I need a 6-month emergency fund?

Having a 3 to 6 month emergency fund is a critical part of your financial strategy and wellness.

Without designated savings for surprise expenses, you could easily start relying on your credit cards to pay for your financial emergencies.

It’s easy to focus on the urgent in front of you – paying the mortgage, buying the groceries, filling the gas tank.  You might even be wondering how in the world do I save up an emergency fund if I can barely pay my bills as it is?

Learning how to build a 6 month emergency fund will definitely require some sacrifices, and possibly a few lifestyle adjustments.  But, the security of having one is worth the inconveniences you’ll experience as you’re building it.

The statistics for the number of U.S. adults that have emergency funds is alarming. 

According to, nearly 1/3 of Americans don’t have any emergency savings, and only 18% 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. When expenses go up but income does not, this is called living beyond your means, and your margin for saving is too narrow to build up an adequate emergency fund.

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 will teach you how to build a 6-month emergency fund in 5 simple steps, 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 determine the amount of savings you’ll need, set a time frame, and find money in your budget to save.

What is an emergency fund?

An emergency fund is a designated amount of cash savings, specifically set aside for unexpected expenses that require an immediate financial outlay.

These unplanned expenditures could include events such as surprise medical bills, expensive home repairs, or getting laid off from your job.

Having readily available and easily accessible savings will prevent the need to use high-interest credit cards for these financial emergencies.  You’ll also increase your financial security and reduce financial stress.

How much emergency savings will I need?

It’s wise 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.

Woman counting cash

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 to save, more is better. 

Many financial advisor strongly recommend a fund that could cover 3 to 6 months of expenses.  Your safest bet is to consider the worst case scenario and prepare for that.

Just remember that 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 pursue other income opportunities. 

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 up 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.  However, if you’re the sole provider, you will definitely want a bigger cushion.

To set a target savings goal, 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 6, or however many 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. 

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 build my 6-month emergency fund?

Of course, there is no specific time period it will take to build up your emergency fund.

The best advice I can give you is to take as long as you need.

Woman putting a coin in a piggy bank

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.

How to build a 6-month emergency fund in 5 steps

Most people have money to save, they just spend it before they can. Once you commit to a savings plan, you will likely find extra funds you can put towards your emergency fund.

First, you need to identify where your savings will come from. Then, you need to be intentional about consistently adding those funds to your emergency account.

Take these 5 simple steps to free up cash in your budget and start saving money for your emergency fund.

STEP 1:  Track your spending

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.

Related Post:  The Ultimate Zero-Sum Budget Resource Guide

STEP 2:  Reduce expenses

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 motivated to build up your emergency fund, you could choose to sell a vehicle or refinance your mortgage for a lower payment.

Find those expenses in your budget that you can reduce or eliminate.  Then, redirect those funds to your emergency savings account.

Related Post:  How To Save $1,000 A Month (Without Working More)

STEP 3:  Increase income

In addition to finding the money already in your budget, you can also choose to generate more income with ideas like these:

Woman serving coffee
  • 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 time or energy, 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.

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STEP 4:  Automate savings

The easiest way to save money is by eliminating the choice.  When your paycheck hits your checking account, have an automated transfer set up to move a certain amount into savings.

Or, if your employer offers direct deposit, you can split your paycheck between checking and savings.

This way, you remove the decision to add money to savings.  It’s done automatically, and it’s added to your emergency account before you even see the funds.

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STEP 5:  Have a plan for unexpected income

It’s always a nice surprise to receive extra money.  But, if you don’t have a plan for it, your emotions will decide how to spend it.

Some ways you could come into some unexpected cash are:

  • Getting a raise or promotion at work
  • Receiving monetary gifts for your birthday
  • Getting a large tax refund
  • Inheriting money from a relative

Decide ahead of time how you will handle any unexpected money you receive.  Commit to putting at least a portion of these windfalls into your emergency fund.

This will give you savings an extra boost, and help you reach your savings goal quicker.

Related Post:  How To Make An Emergency Fund Last Through A Crisis

Where should I keep my emergency fund?

Your emergency fund needs to be a separate account that’s liquid and easily accessible.  

Man doing online banking

You don’t want to tie up your emergency savings in long-term CDs, real estate, or your home equity.

Instead, choose an interest-bearing savings vehicle that offers the highest yield you can find.  A good option is an online bank, which will typically offer higher rates than brick and mortar locations.

Besides a high-yield savings account, you could keep your emergency fund in a money market account or even short-term CDs.

Just be fully informed about the rules for transferring, withdrawing, and spending these funds before you open the account.  You need your savings to be available and accessible when sudden emergencies arise.

Also, don’t be too concerned about having your 6-month emergency fund missing out on higher returns that your investments generate.  An emergency savings account is not an investment – it’s insurance.  

Video: An Emergency Fund Changes Everything

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 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 5 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

How To Build A 6 Month Emergency Fund In 5 Simple Steps

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