How to Build an Emergency Fund
Life is full of surprises—a car repair, medical bill, or job loss. An emergency fund is your financial safety net. Here’s how to build one, even on a tight budget.
What Is an Emergency Fund?
An emergency fund is a stash of money set aside to cover unexpected expenses. Ideally, it should cover 3–6 months of living expenses. Keep it in a separate savings account so you’re not tempted to dip into it.
Step 1: Set a Monthly Savings Goal
Start small. If saving $5,000 feels overwhelming, aim for $500 first. Break it down: $42 per month gets you $500 in a year. Automate transfers to your savings account on payday.
Step 2: Cut Unnecessary Expenses
Review your spending for a month. Cancel unused subscriptions, cook at home more, and look for cheaper insurance. Put every dollar saved directly into your emergency fund.
Step 3: Boost Your Income
Consider a side hustle—freelancing, tutoring, or selling unused items. Even an extra $100 a week adds up fast.
Step 4: Keep the Fund Accessible but Not Too Easy
Use a high-yield savings account (not invested in stocks). You need liquidity, but don’t link it to your checking account to avoid impulse withdrawals.
Once you’ve built your fund, celebrate—then start investing the extra! Financial peace of mind is priceless.