Having an emergency fund in place, even if it’s small, makes life’s little surprises easier to handle. Building up that fund is a huge accomplishment, and worth the time and effort you’ll put into the project.

Stressed man looking at engine of his carThis money isn’t supposed to serve as a last-minute-shopping-trip fund. Think about the things that you may be forced to charge on a credit card or take out a loan to cover. An unexpected car repair bill, deductible for an emergency room visit, or a broken washing machine are all things that happen in the normal course of life. Wouldn’t it be nice if you could handle those things without having to borrow money?


$1,000 covers the vast majority of small emergencies. If that seems like an impossible goal, don’t worry. Adjust it to $500. It’s OK if it takes you awhile to get to your emergency fund goal. The idea is to move steadily toward your number, so start by setting aside a small amount of money out of each of your paychecks. Even if it’s only a few dollars, the money adds up over time. 

The easiest way to find money to add to your emergency fund is by cutting expenses you won’t miss. Start by cancelling unused subscriptions. Go through your bank account transactions for the last month and identify any automatic deductions. You can get rid of the ones you don’t use regularly. If you regret your decision, reactivating your subscription takes just seconds.

If you don’t have extra money to dedicate to your emergency fund, start collecting change. At the end of the day, add any coins and $1 bills to a jar. It may take time, but you’ll see results. Most banks and credit unions have a change counting machine that will make depositing your money every few weeks a breeze.

If you normally get a tax refund, consider adjusting your deductions. Your employer’s HR department can give you a new form. Compare your new paycheck amount to your former amount. Put the difference into your emergency fund every time you get paid. This will reduce the amount of your tax refund, but you’ll get access to the money you’ve earned much faster than if you wait for tax time each year. Alternatively, you can use your tax refund to start or add to your emergency fund.

A recent trend which may be helpful in starting your emergency fund, is setting up an account where your bank takes the difference between your debit purchases and rounds up to the nearest dollar. So, if you order lunch and it’s $7.49, then .51 cents will go into your savings account. This allows you to start saving or increase the savings in your emergency fund without really thinking about it, over time these savings can add up.

Look closely at your monthly bills. Most people don’t inspect their utility and phone bills line-by-line. There may be charges for add-on services that you don’t use. Cancelling those services could free up some space in your budget.

Taking on a seasonal part-time job and dedicating your earnings to your emergency fund works well for some people. Others prefer to sell the things that they no longer need, want, or use for extra cash.

If you contribute to a 401(k) or other retirement account, remember that accessing this money to pay for unexpected expenses comes with steep penalties. An emergency fund can help protect your savings and keep you from facing a big bill at tax time. Remember, if an unexpected expense comes up and you don’t have enough in your emergency fund, an installment loan can offer you access to money, while spreading the payments out equally over time.

Learning to manage a budget becomes a fairly simple task with a bit of practice. Take a look at The Basics of Budgeting to get started.

June 19, 2018
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