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Last Updated on May 5, 2023 by Daniella
Emergency funds are the foundation of any sound financial plan.
Before you think about saving for anything else, you should make sure you have an emergency fund first, or what I like to call a “life happens” fund. They’re your safety net so that when you fall off the trapeze of life, you have something to catch you. Similar to how side hustles are there to catch you if you were to get laid off from a job.
But they’re also a pain to put together.
Let’s talk about different strategies for how to build an emergency fund.
How to Build an Emergency Fund
You have to be dedicated to taking care of your future self in order to successfully fund an emergency account. I know it’s hard to say no to latte’s and nights out and say yes to savings goals, but you can have your latte and save too.
1. Set an emergency fund goal.
Emergency funds should be at least a month’s worth of expenses to start. This is the baseline because you know that if tragedy strikes, you’ll be entirely taken care of for at least a month.
A stronger emergency fund takes care of 3 to 6 months worth of expenses. And some people even keep a year’s worth of expenses in their saving’s account for rainy days.
Those numbers might seem overwhelming, and it’s okay if they are at first. It can feel too ambitious to go from nothing in savings to multiple thousands of dollars in savings. If this is the case, you might want to start with an attainable goal, like $500 to $1000, and then build off of that.
As you build your emergency fund, you can save it in a high yield savings account (HYSA) so your money earns interest rather than losing value in a normal bank account. I recommend a HYSA at Cit Bank
where you can easily sign up and manage your account online, plus you’ll earn .40% on your money. That’s 20 times above the average rate you’d get at a brick-and-mortar bank.
Free Printable Savings + Debt Payoff Color In Trackers
Sign up to get 2 coloring charts: 1 for tracking emergency fund savings milestones and goals and one for student debt payoff payment tracking. You can use this on a tablet or print it out to keep in a journal and color in as you reach your goals. You will be added to our email list when you do this but don’t worry – we won’t send any spam.
2. Set a savings goal.
From there, you’re going to want to tweak your budget and create a savings goal. Look at what you can reasonably start to save. If that’s $25 a paycheck, celebrate and chuck that money in savings. If it’s $10, that’s more than nothing and be proud of yourself. You want the savings rate to be sustainable and to build up over time.
Obviously the more that you can save, the faster you can hit your savings goal. But don’t let the fact that you might not be able to save a ton of money up at first stop you from saving at all.
You can also set up automatic transfers to your high yield savings account so you make sure you save without having to manually do anything yourself. Automation makes everything so much easier as long as you can handle money being automatically transferred out of your account.
If all else fails and there just isn’t anything extra in your budget to be able to save, there are things that you can do outside of your regular job to help you save up more money.
3. Sell your extra things.
Arguably the quickest way to find extra cash to jumpstart your savings account is to sell some of your things.
With Poshmark, Facebook Marketplace, and any of the dozens of other selling apps easily at your disposal, you can list your items and sell them fast. This works especially well with old furniture that’s in good condition, room decor, and kitchen appliances you bought but never took out of the box.
Treadmills and clothing are also solid options when looking for things to sell. Or, you could even have a garage sale and put that money towards your newly established savings goal. As long as you don’t use the item consistently and won’t miss it when it’s gone, it could be worth a sale.
Take that money and stash it in a place that you won’t touch. This could be a piggy bank or a high yield savings account. Wherever you store it, make sure that it’s not going to tempt you to spend it. The goal is to save the money instead of spending it.
Related: 22 Creative Ways To Turn Your Clutter Into Cash
4. Pick up a side hustle.
Side hustles are a great way to save money. To find your perfect side hustle idea, take the free side hustle quiz that matches you based on your personality, interests, and lifestyle and you’ll get tons of free resources to hit the ground running with your new idea.
Since you’re earning money outside of your regular job, consider it “bonus cash” and put that bonus cash towards saving. The great thing about side hustles is that you can make money doing just about anything.
If you’re an artist, you can sell your art on Etsy.
Or are you super organized? People buy cute check lists all the time on Etsy and even hire people to be their professional organizers.
Maybe you’re a teacher, you can offer to write your fellow teacher’s lesson plans for a price. You get some extra cash, and your fellow teacher doesn’t have as much work.
If you’re a writer, you can freelance and write blog posts for people. It doesn’t matter what your skills are, there is a way to monetize them.
You can also do more traditional side hustles, like Instacart or Doordash. Pet sitting, dog walking, housesitting on Rover is another great way to earn extra cash while working a pretty fun side gig.
Just make sure that you’re putting that money in your savings account and not spending it instead. If you struggle to make money without spending any of it, you can do an 80/20 split. Save 80 percent of your money and spend 20 percent of this. This can help the bug to spend, because it’s hard to save 100 percent of your money, and that’s okay if sometimes you want to treat yourself too. It’s fine to save most of it and spend the rest.
Related: Rover Sitter Review: Is Rover a Good Side Job?
5. Gamify your savings.
Sometimes savings for savings sake is hard. But if you gamify your savings it’s easier to save. If you’re into coloring, you can print of a savings coloring sheet. Every time you save $100, you can color in a section. There’s a bunch of different ones on etsy you can look through. Or if you pay for things in cash, every time you get a $5 bill back, stick it in savings. Over time, those small bills will add up.
You could also do a savings challenge. The 52 week one is pretty popular. The first week of the year, you save a dollar, and the second week, you save two. So on and so forth until the last week of the challenge, you save $52. At the end of the year and at the end of the challenge, you’ll have $1,378 in your savings account. That’s a great kick start to an emergency fund.
We also have both free coloring trackers as well as a free savings challenge that you can grab in our free resource library!
6. Plan celebrations at different milestones.
Another way to encourage yourself to save money is to have milestone goals.
Maybe you take yourself to the movies when you save $500 and then you buy a video game that you’ve been really wanting at $1,000 in your emergency fund. This will incentivize you to save money faster, because you’ll be able to purchase your fun items faster. Just don’t pull the money to buy them out of savings, which would defeat the purpose of saving an emergency fund.
With these strategies, you should have your emergency account fully funded in no time.
Saving can be hard, no matter what all the personal finance gurus tell you online. Especially with the amount of emotional baggage that money comes with. Give yourself grace as you work through your savings goals and also be sure to spend some too so you don’t deprive yourself.
With any finance goal, balance is key.
What are some of your favorite ways to save? Tell us in the comments below
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Moriah Chace writes about low-income money and queer culture. Her work has been featured by The Motley Fool and other large media outlets. She has words in Women’s Personal Finance, The Deal Taker, and Live Betr. As a part-time barista and full-time coffee addict, she spends her spare time over-caffeinated fixing up her 1978 Winnebago Itasca and plans to travel around the USA with her dog and two cats after she breathes life into the old soul of an RV.