August 30, 2023 | Sammy Tran

A Guide To Building Your Emergency Fund


Building Your Emergency Fund

Safe for cashalexkich, Adobe Stock

Life is full of unexpected surprises, and while some can be delightful, others can hit your wallet hard. 

This is where an emergency fund comes in—a financial safety net designed to cover unforeseen expenses like medical emergencies, car repairs, or job loss. 

If you've never had one, fret not. This guide will walk you through creating your first emergency fund, step by step.

1. Understand Its Importance 

saving money in a jarlovelyday12, Shutterstock

Before diving in, it's crucial to comprehend the significance of an emergency fund. 

It's not just another bank account—it's peace of mind. 

It ensures you don't dip into savings meant for other goals (like buying a home or vacation), and it prevents you from accumulating debt during hard times.

2. Set A Target Amount 

A woman budgeting moneyTima Miroshnichenko, Pexels

How much should be in your emergency fund? 

A good rule of thumb is to start with a goal of saving three months' worth of living expenses. 

For some, this might be $3,000, while for others, it might be $10,000. Adjust this amount based on your personal comfort level and circumstances.

3. Start Small 

A person holding a jar of coinsTowfiqu barbhuiya, Pexels

If you're new to saving, the target amount might seem daunting. 

That's okay. Begin by setting aside a small, manageable amount each month—whether it's $50, $100, or more. Over time, these contributions will add up.

4. Open a Separate Account 

People in an office having a meetingRDNE Stock project, Pexels

To avoid the temptation of spending your emergency savings, open a separate savings account. 

This will mentally separate the funds from your daily spending money. Look for accounts with no fees and higher interest rates to maximize your savings.

5. Automate Your Savings 

A woman working on a laptopAndrea Piacquadio , Pexels

Set up an automatic transfer from your checking to your savings account. Automating the process ensures consistency and removes the hassle of remembering to save each month.

6. Cut Unnecessary Expenses 

A couple doing paperwork togetherWayhome Studio, Adobe Stock

Review your monthly expenses and identify areas where you can cut back. Maybe it's that extra coffee shop visit, or perhaps it's a subscription service you no longer use. Redirect these funds to your emergency savings.

7. Boost Your Income 

A man painting a houseCraig Adderley, Pexels

If you're finding it hard to save, consider ways to increase your income. 

This could mean taking on a part-time job, freelancing, or selling unused items. Any extra cash can be funneled into your emergency fund.

8. Stay Committed And Review Regularly 

A woman budgeting with cash and receiptsKarolina Grabowska, Pexels

Building an emergency fund is a commitment. Regularly review your progress, and if you reach your initial goal, consider raising it. Life circumstances change, and as they do, your emergency fund should evolve too.

9. Avoid Touching the Funds

A young family saving moneyJenkoAtaman, Adobe Stock

Remember, this fund is for emergencies only. Avoid the temptation to dip into it for non-urgent expenses. If you must use it, prioritize replenishing the amount as soon as you can.

10. Celebrate Milestones, But Stay Disciplined

A group of friends having coffee togetherJacob Lund, Adobe Stock

Every time you hit a savings milestone, whether it's reaching the halfway mark or achieving your full emergency fund goal, take a moment to celebrate. 

This could be a simple acknowledgment, treating yourself to a small reward, or sharing the achievement with loved ones. Recognizing your progress can boost motivation. 

Final Thoughts

SavingsAdobe Stock

While it's important to celebrate, remember to remain disciplined. The end goal is long-term financial security, and maintaining that discipline ensures your emergency fund stays intact for when you truly need it.

Building your first emergency fund may take time, but it's an investment in your financial security and peace of mind. 

By following these steps and staying committed, you'll be prepared for whatever life throws your way.


READ MORE

successful

Successful People Share Their 'Easy Money' Secrets

Having a little extra cash at the end of the day is never a bad thing, right? Successful people answer “What is your way of making ‘easy money’?"
April 7, 2021 Eul Basa
112

Rich People Share The Easiest Way To Make Over $100K a Year

While many people live pay-check to pay-check, there are those who are able to earn over over $100K a year. Here are their stories.
May 21, 2019 Eul Basa
1

Dishonest People Confess The Most Unethical Way They've Made Money

We searched the web for the most unethical ways people have made money and the answers have been both hilarious and frightful.
April 7, 2021 Eul Basa
123123123

Regretful People Share The Most Expensive Mistake They've Ever Made

Often the biggest mistakes we make are the ones that end up teaching us the most. We ask the Internet, “What's the most expensive mistake you've ever made?”
September 16, 2018 Eul Basa
easymoney

The Biggest Money Mistakes People Are Making, As Told By Successful Savers

Whether we step in or not, watching other people make silly money mistakes can be frustrating, especially if you've made those same mistakes. 
August 25, 2018 Eul Basa



Dear reader,


It’s true what they say: money makes the world go round. In order to succeed in this life, you need to have a good grasp of key financial concepts. That’s where Moneymade comes in. Our mission is to provide you with the best financial advice and information to help you navigate this ever-changing world. Sometimes, generating wealth just requires common sense. Don’t max out your credit card if you can’t afford the interest payments. Don’t overspend on Christmas shopping. When ordering gifts on Amazon, make sure you factor in taxes and shipping costs. If you need a new car, consider a model that’s easy to repair instead of an expensive BMW or Mercedes. Sometimes you dream vacation to Hawaii or the Bahamas just isn’t in the budget, but there may be more affordable all-inclusive hotels if you know where to look.


Looking for a new home? Make sure you get a mortgage rate that works for you. That means understanding the difference between fixed and variable interest rates. Whether you’re looking to learn how to make money, save money, or invest your money, our well-researched and insightful content will set you on the path to financial success. Passionate about mortgage rates, real estate, investing, saving, or anything money-related? Looking to learn how to generate wealth? Improve your life today with Moneymade. If you have any feedback for the MoneyMade team, please reach out to [email protected]. Thanks for your help!


Warmest regards,

The Moneymade team