Building Your Emergency Fund

Any financially smart adult thinks of having an emergency fund as a necessity. Life is full of uncertainties, and you need to have a separate bank account intended to cover unforeseen expenses caused by unfortunate circumstances, such as an illness or loss of employment.

It’s crucial to have a financial buffer for you to survive your day-to-day life without relying on high-interest credit cards or loans when things get rough. Avoid adding on your debts when you’re facing financial challenges. So, you need to have ready cash set aside for emergencies.

Perhaps you’ll ask: how much emergency fund should I have? To answer that question and other related queries concerning emergency funds, read this blog post below.

Timing is the Key

According to most personal finance gurus, your emergency fund should cover three months of living expenses at the minimum. In this way, you won’t have a hard time financially if you lose your job or have to pay for medical bills.

However, the main problem with this idea is that not everyone has the same lifestyle, income, and financial circumstances. For example, if you have monthly expenses of $5,000, your emergency fund should have at least $15,000 to meet the three-month standard. That’s a huge sum of cash for most people!

Also, if you have loans or credit card balances that you need to pay, it will be difficult for you to set aside that sum of money for your emergency fund. That’s why timing is the key when building a fund for future emergency expenses.

Make sure to pay your current debts first before you put much money on your savings account. For sure, you don’t want the interests on your debts to accumulate faster than the gains on your savings. So, find the right timing!

Start Saving Even If It’s Small

Even if you’re paying for your current debt obligations, it doesn’t mean that you shouldn’t start building your emergency fund. You can start setting aside a small amount of money for that purpose. Starting with a small savings is much better than nothing at all.

It’s hard to know when emergency expenses come. That’s why if you’re receiving income every month, make sure to save some of it for you to have a buffer against unforeseen expenses in the future.

While debts prevent you from focusing heavily on building your emergency fund, saving money even at a small scale is a smart choice because it’s dangerous to not have savings. For example, you can open an emergency savings account that has $500 or $1,000. This amount of cash can already cover minor expenses, such as car repairs or paying for medicines.

In the time that you get rid of your debts, you can already begin increasing your deposits into your emergency savings account.

Put Money On Your Savings Fund Monthly

Since your goal is to build a three months worth of emergency fund or more, it’s a must to set aside money in your account once a month until you reach your goal. You can split your direct deposit or start an automatic transfer into your emergency fund every month. It’s preferable to save 10% of your monthly salary or net income into this separate savings account.

If you find it hard to slice that kind of percentage off your salary, you can choose to make a few adjustments to your monthly expenses. Even if you can’t save 10% of your paycheck, surely you can save cash if you spend less than you’re used to in a month.

  • Avoid spending too much on streaming or cable subscriptions.
  • Cut your electricity expenses by turning off the lights in the morning or using a programmable thermostat.
  • Plan your grocery list carefully to prevent overspending.
  • Minimize your expensive habit of going out to lunch or dinner.
  • Lessen your gas expenses.
  • Look for a more affordable home or car insurance.
  • Negotiate with your credit card issuer/s to reduce the interest rates on your credit cards.
  • Go for a debt consolidation loan to avail of a lower interest rate and pay your debts quickly.

Save Money into Your Emergency Fund Instantly

Setting aside cash into your emergency fund every month is a good thing. But if you want to build your emergency fund faster, you can deposit a large amount into it. Of course, that’s a wise choice if you can afford it.

If you’re receiving monthly, quarterly, or annual work bonuses, you can opt to put that money or some of it into your separate savings account. In this way, you can build a fund for future emergency expenses in no time.


Building an emergency fund is crucial for you to keep afloat in times of a financial crisis. If you lose your job or get ill, for instance, you can use the money from your emergency fund to cover important expenses. Read the tips mentioned above on how to create an emergency fund.

Author Bio:

Bree Diaz is a blogger who specializes in writing about personal and business finance management. She has ample knowledge about debt management and wealth building. In this article Bree answers the question of “how much emergency fund should i have” and how to build it, in a way that is easy for readers to understand. Bree is also an avid traveler and a hobbyist.