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Emergency savings: Learn how to start them, how to maintain them

Use these 5 steps to build up emergency savings over time and help protect you and your financial goals when unexpected expenses happen.

Photo of a dog whose owner could afford to pay for their surgery because they had an emergency fund.
4 min read |

Has life ever thrown you a financial curveball—an unexpected medical expense or car repair, even a job loss—that you didn’t have emergency savings to cover? If so, you’re not alone: Almost one out of four people don’t have an emergency fund. Of those who do have savings, nearly 40% have less than one month of income set aside.1

These five steps may help, whether you need to start an emergency fund or would like your existing savings to be a little more robust.

Step 1: Calculate how much you need in an emergency fund.

It can be easy to get overwhelmed by recommendations for emergency funds: three to six months of your expenses. That big total may feel completely unreachable.

Instead of focusing on the end goal, try setting a mini goal. How long would it take you to save $100? How about $1,000? The important thing is to get started, then consistently add to your emergency fund. Eventually, you can decide your end goal—and a date that’s doable to reach it.

Step 2: Pick how you want to start an emergency fund.

Two options can help you build up an emergency fund over time, and boost it in big jumps, too.

  • Automate it. Have regular emergency fund contributions direct deposited from each paycheck into a savings account. If you set aside $25 a week, at the end of two years you could have $2,600 saved.
  • Transfer it. Use money from a bonus or tax refund to build your total emergency fund savings faster. Another idea: If you have extra from your budget at the end of a month, you could add that, too.

Step 3: Choose an account for your emergency savings.

Because those savings are designed to be readily available, an account that’s liquid and accessible offers a useful spot for your emergency fund. You may want to put some constraints on it, though—for example, online but not ATM accessible. Or, a high yield savings account with minimum balance requirements may be a good fit, too. (You can compare online bank savings and money market rates.)

Step 4: Set some parameters for using your emergency savings.

“Emergency” varies by person, but generally could include expenses that are unexpected, unavoidable, or urgent. For example:

  • Unexpected: You’ve lost your job and need to pay the bills.
  • Unavoidable: It costs more to fix your broken refrigerator than to buy a new one.
  • Urgent: Your dental bill isn’t covered by insurance.

One big question that many people have: Should they use emergency funds or put a bill on a credit card or rely on a loan? If you do the latter—credit card or loan—you’re adding to debt, and will likely have to pay interest, fees, and perhaps even penalties.


Step 5: If you use some of your emergency savings, make a plan to replace it.

The tools you used to set up your emergency fund—automating deposits, adding extra savings when you can—can help you build that account back up.


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