How To Save For an Emergency Fund (Step-By-Step Guide)

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Unexpected trouble can be just around the corner. For example a car breaks down, you incur medical expenses, or you need to do some home repair.  These are just a couple examples why you should save for an Emergency Fund.

For me, one of the most important categories in our budget is our emergency savings. Without it, we would have gotten ourselves into credit card debt more than once.

No matter how much we hate to admit it, we can’t control everything. Life happens, and so does the unexpected. Those who haven’t saved for an emergency fund may find themselves falling into a bit of a financial turmoil when dealing with their finances.

Before we dive into how to save for an emergency fund we are going to cover some of the basics.

Looking For Some Reasons To Save For An Emergency Fund?

You are! Well check out last weeks post on 10 Reasons Why You Need an Emergency Fund

BONUS INFO!!! Because I love providing our readers with the best tips, tricks, and hacks for saving money be sure to check out our article on Health Savings Accounts (HSAs). HSA’s are another great way to cover unexpected medical expenses.

Now let’s continue….

It seems that a lot of people are beginning to think about emergency funds. Frankly, I think that’s a good thing – emergency funds are a key part of a healthy personal finance situation.

The biggest problem, however, is that it’s intimidating to save 3-6 months of earnings. That’s a whole lot of money!

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What exactly is an Emergency Fund?

Many people don’t understand what an emergency fund is and when it should be used.

In simple terms, an emergency fund is cash that you’ve saved to help you maintain normal life through the emergencies that life throws at you.

When a financially savvy older acquaintance of mine asked me about my Emergency Fund.  I simply stopped and gave him the “deer in the headlights look”. What? What exactly is this fund you are talking about?

 I was dumbstruck at the thought up having to stash away more money for something that may or may not happen in the future.  This friend of mine explained the benefits of having an emergency fund and provided ways of thinking about it in a new perspective.

Let’s outline what this savvy friend taught me.

emergency fund

What is an Emergency Fund For?

Emergency funds are used to help you maintain your normal life through the emergencies that life throws you.  

Most of the time, you shouldn’t touch the emergency fund– it just sits there earning interest and waiting until you actually need it. When you lose your job. When an appliance breaks down. When your car needs repaired.

Having an emergency fund means that you have room to relax. You don’t have to panic if you or your significant other loses your job, you have to pay a large medical bill, or you have to re-roof your house. 

First Steps With Emergency Savings


When first starting out many people bite off a gigantic goal for their emergency fund and then find that it’s very hard to get there. Six months of living expenses for an emergency fund is an enormous goal, one that can take some people years to reach.

Instead, a good way to start is to set a goal that’s more reasonable.  Make it your initial goal to have an emergency fund of $400 or $500. That’s a goal that most can reach in a few months, and yet it’s an amount that can make a big difference if you are hit with an emergency.

From there, you can break new goals into smaller goals. Perhaps you can save a $25 a week. If so, you will have an additional $250 in emergency money in just ten weeks.

Maybe you can stash away $40 a week, which would bring you an additional $500 in only three months.


When deciding on which savings account to open, I recommend an online savings account and here’s why:

  • Online savings accounts make money transfers really easy. You can transfer $5 just as easily as you can transfer $500.
  • Opening an online-only savings account makes it a little inconvenient to use (which is good you won’t “accidentally” spend it). It usually takes 2-3 days to transfer money from your online savings into your regular checking account. —-You are probably thinking to yourself wait, this is an emergency fund I need the money quickly. The truth is, most of the time you can wait 2 days to pay for your “emergency.”
  • Most are free to open and have no fees

I highly recommend Cit BANK for an online-only savings account. They are now offering 2.25% annual yield (this is higher than most savings accounts). There are no fees for opening an account, no monthly maintenance fees, and they pride themselves on fast deposits and withdrawals. You can read all about it here.


Take a look at your budget and decide how much you can afford to have transferred from your bank into your savings. Chose a consistent day that you would like to have the money automatically transferred and stick with it.

If there is any advice I can give you, it would be to automate your savings. Automation is a huge help when it comes to saving for an emergency fund. Not only does it get you into the habit of saving regularly, but it almost happens without you even missing the money.

By eliminating yourself from your emergency fund equation you are essentially saving yourself from you! Yep, sometimes you can be your own worst enemy when it comes to saving money. By automating your savings, you are setting up a plan that will lead you to success.

emergency fund

This is New, Give it time

You’re thinking, “That’s great, but where the heck am I going to come up with $40 a week? I can barely make ends meet now.”

That’s a pretty typical feeling from those who are just beginning this financial endeavor.  However, there are many different ways that a person can save a bit of extra money each month.

Ways to save money each month

Credit cards

Start by asking for a rate reduction on your current credit cards. Often, the negotiation process is as simple as asking your creditor for a reduced rate.

Sometimes it works, sometimes it doesn’t, but the credit card industry is fiercely competitive and your card company will do all it can to retain you as a customer.

You could also suggest to your creditor that you’re considering to transfer your balance off of the card and close the account. Sometimes mentioning the words “closing your account” lets your creditor know you mean business making them more inclined to work with lowering your rate.

Speaking of which, you might even consider following through on that and transferring your balance to another card of yours that has no interest or a very low percentage, which can help you pay off that debt faster.

Look for a new 0% Balance transfer offer.  

Back in the day, we made some large purchases causing us to be a bit in debt. Not too bad, just enough for us to be concerned. We researched, applied, and were approved for a 0% balance transfer credit card.

This transfer allowed us to move our hefty high-interest debt to a card that offered 0% interest for 18 months. This simple act really saved us.  We were able to make large strides in paying off our debt in under 8 months.


Comparison shop for auto and homeowners insurance before renewing your existing homeowner’s insurance policy each year. 

Check out the rates of competing companies.  Try Progressive, Geico, American Family, State Farm, and AIG, for starters. Just visit their websites, get some quotes, and make a switch.

Also I recommend only using ATMs associated with your bank or credit union. Using the ATM of another financial institution once a week might seem like no big deal, but if it’s costing you $3 for each withdrawal, that’s more than $150 over the course of a year.


Plan your meals in advance and stick to a list while grocery shopping. People who do food shopping with a list, spend much less money than those who don’t. The annual savings could easily be thousands of dollars.

Why not consider brown bagging your lunch? The reason you hear this tip so much is because it works!

If buying lunch at work costs $5, but making lunch at home costs only $2.50, then in a year, you could afford to create a $500 emergency fund and still have money left over.

An action we did to bulk up our emergency fund was committing to eating out one less time each month. We found that this was an easy way to save money without sacrificing our lifestyle. 



Use public transportation.  Most metropolitan areas have surprisingly good public transportation options – and they’re far cheaper than driving yourself.

Or perhaps you could ride your bike. If you’ve thought about getting into better shape and you only live a mile or two from work this is a great option. Riding a bike provides you with some exercise while keeping your from wasting your dollars on gas and car maintenance.

Make It Automatic

After following the steps above you have now trimmed $50 a week from your spending, but now you have this cash sitting there and it’s tempting to spend it on something more exciting than an emergency fund.

You’re tempted…but… you don’t have to be tempted. Instead, as mentioned above you can have it automatically transferred into your online banking account.

If saving money proves to be easier than you thought and you’re wondering how to save even more perhaps you can look into some beginner investing to really rally up your savings.

My absolute favorite beginner investing tool is Acorns. You can read my full review on Acorns and why I love it here!

We have been using Acorns for quite some time and the best part of it is I don’t even notice that money is being saved! It’s the best tool for saving money without much impact.

emergency fund

Set Reasonable Milestones Along the Way

In a few months, you’ll hit your first milestone – you will be excited, it will feel good.  Your account will have enough money in it that it’ll start earning a bit of interest of its own and you’ll start to feel in control of the situation.

Now’s the time to keep going. Set another goal – an emergency fund of $1,000. Keep that automatic savings plan in place and keep it rolling in.

Once you reach that goal, aim for a single month’s worth of living expenses. Then two months. Then three. And just keep watching that emergency fund grow.

You might just find that this is a lot of fun.  So fun that you may start seeking out additional ways to save. Just keep setting goals for yourself and keep pushing yourself just a little till you make it where you want to be.

Before you know it, you will have a considerable emergency fund and you’ll sleep a lot better knowing you accomplished your financial goal.

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    Motivation to Save

    If you need some motivation to save a bit more, print a copy of our top 10 reasons to have an emergency fund and tape it to your bathroom mirror, put a copy on your desk at work, or keep it in your car.  

    Read it frequently, until you can feel the power of cash and how saving is more powerful than spending.  Saving money isn’t so bad after all.

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    How to determine your emergency fund amount. Easy steps to a sound financial plan. How to start saving today even if you don't think you have the money. Emergency Fund | Emergency Fund Amount | How to Build an Emergency Fund |Emergency Fund Ideas |Emergency Fund Tips | Emergency Fund 1000 |Budget | Budgeting | Budget Emergency | Saving Money Emergency | Saving Money | Save Money | Save Money Emergency | Saving Money Tips | Saving Money Ideas

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