Retirement, Investments, & Insurance for Individuals Build your knowledge Emergency fund basics: How to save smart for the unexpected

Emergency fund basics: How to save smart for the unexpected

An emergency fund can save the day, for everything from a leaky pipe to medicine for a pet. But how do you start one and pay for everything else? We’ve got ideas.

A woman looking at her broken down vehicle happy she has an emergency fund.
5 min read |

When’s the last time you had to come up with more than $100 to pay for something unexpected? Maybe it was something happy—a wedding present for a friend. Or maybe there was a less joyful reason, such as a home repair. Did you have to pay a bill late to come up with the cash—or charge it to the credit card?

An emergency fund is a tool you can use for just that. But cobbling together enough dollars to create one of any size can be daunting—especially when you have lots of competing financial priorities.

The key is to calculate how much you need, and simply start where you’re at. (You don’t have to put it together overnight!)

How much money should be in an emergency fund? It depends.

Unprepared to cover an unexpected expense? You’re not alone with a lack of emergency savings.

Only 43% of U.S. adults would pay for an unexpected expense from their savings, and 36% have more credit card debt than savings.1

Even more people—68% overall and 85% of Gen Z—worry they wouldn’t be able to cover just one month of living expenses if they lost their primary income.1

Consider building up three to six months of income or expenses to cover:

  • housing
  • food
  • insurance
  • utilities
  • transportation
  • debt

Your emergency savings goal may be flexible if:

  • There’s more than one income in your household.
  • Your income is more reliable.
  • You have little debt.
  • Your budget already includes money for unexpected expenses such as home and car repair.

What are unexpected expenses?

Home repair: Plan on a set percent of your home’s sale price for regular maintenance—for example, 1%.

Car repair: Even small fixes like windshield cracks may set you back several hundred dollars.

Medical emergencies: The average visit to an emergency room costs $2,600.2

Pet care: Circumstances vary, but costs for emergency surgery on a dog, for instance, can reach $8,000.3

Use our emergency fund calculator to estimate your needs:

5 tips to build your emergency fund

  1. Give yourself time. Think of it as a marathon, not a sprint.
  2. Create a habit. Make contributions regularly or through auto deposit.
  3. Follow a hard and fast rule. What’s the “50-30-20 rule”? That’s when you spend your income on three main categories: 50% needs, 30% wants, and 20% savings.
  4. Celebrate meeting small goals. Saving $1,000 is a big deal.
  5. Forget about it—if you can. Don’t touch the money (until an emergency, of course).

4 ways to boost your emergency fund

  1. A raise: Add a portion to emergency savings.
  2. A tax refund or bonus: Stash it in the emergency fund.
  3. A gift: Every $25 counts.
  4. A smaller expense: For example, cut back on TV streaming subscriptions and transfer the savings each month to your emergency fund.

How to start an emergency fund

Now that you know the basics on emergency funds, follow the five steps in this article as an easy checklist to help make progress toward greater financial security.

What's next?

A financial professional can help you work through your short- and long-term financial goals. Don’t have one? Check with your HR department or employer to see if your company’s retirement savings plan offers this service. Or, we can help you find one.