More people are exploring ways to save for unexpected expenses and income changes as rising living costs and economic uncertainty remind us how quickly life can change. An emergency fund is a sum of money you set aside that acts as a safety net when unanticipated bills or expenses arise.
Saving money for emergency funds looks different for everyone, and the precise amount changes based on a family’s lifestyle, income stability, and needs. Finding smart ways to build an emergency fund—setting goals, separating funds, starting small, and budgeting wisely—can help anyone reach their target.
Create Savings Goals
The first step in building an emergency fund is to define how much money you’ll need. A good starting point is $500 to $1,000 to cover minor emergencies, but your final goal should be to collect three to six months’ worth of core expenses in the account. Budget for the necessities, including rent or mortgage payments, utilities, food, transportation, and insurance.
Open a Savings Account
Separating your emergency money into its own account can remove temptation to spend it on everyday items and keep your savings clearly defined. The type of savings account you choose can make a difference. Consider keeping your emergency funds in an account that accrues interest, such as a money market or high-yield savings. Even if you prefer face-to-face banking, look for an account that offers digital banking features to make accessing your money easy during a challenging time.
Should I invest my emergency fund?
While investing your money in CDs can be a smart choice for certain funds, most experts do not recommend investing emergency savings. Money you invest is subject to risk, and paying penalties and taxes upon withdrawal can add stress to your situation.
Start Small and Start Now
Saving money for an emergency fund might seem challenging, but you don’t need to accomplish it in a day. Starting small now can leave you in a better position than if you put it off—especially if the account accrues interest. Building your account gradually is one of the best emergency fund tips for anyone, including those living paycheck to paycheck. Meeting small milestones can motivate you to make incremental changes that help you reach your goal.
Here are some ways to save for an emergency fund little by little, that can make a big difference:
- Drop spare change into a designated jar, and once it’s full, deposit the money into your fund.
- Cancel underused subscriptions and transfer what you were paying for them into the account.
- Declutter and sell clothes, electronics, or furniture you don’t use, and put the proceeds to better use—building your fund.
- Dedicate an evening or weekend to side gigs; even $25 extra a week adds up to $1,300 a year.
- Use AI-powered budgeting apps to help identify unnecessary spending and discover excess income you can transfer to your account.
Contribute Consistently
Routinely depositing money is the best way to grow an emergency fund because it builds momentum and helps you establish lasting financial habits. Some experts recommend setting up direct deposit from your paycheck or monthly automatic transfers from your checking account to make regular contributions. You aren’t likely to opt out of saving money for an emergency fund if you treat it like a bill you can’t skip. Making consistent deposits grows your balance steadily, and you won’t need to rely on willpower alone.
Take Advantage of One-Time Cash Flows
Depositing unexpected income, such as an inheritance, tax reimbursement, rebate, or bonus, is a smart way to build an emergency fund quickly. While you might want to set aside some for discretionary spending or paying bills, transferring even a portion to your emergency savings account can help you reach that goal faster without straining your everyday budget.
To make parting with excess income easier, decide in advance how much you’ll commit to saving or spending (and add it to your emergency fund ‘rules’) so you don’t overlook your savings plan when the time comes.
Protect and Replenish Your Emergency Funds
Dipping into this set-aside savings for regular expenses or non-essential purchases hurts the account balance. Financial advisors recommend establishing emergency fund rules to prevent casual spending and to communicate acceptable uses to all family members.
How do I rebuild my emergency fund after using it?
Rely on the same ways you saved to build your emergency fund to replenish it after a withdrawal. Recommit to regular contributions, add windfalls, and set a goal for replacing the money as soon as possible.
A strong emergency savings plan is more than just a nice-to-have—it’s a necessity. The good news is, you don’t need a lump sum to get started. Follow our tips for building emergency funds and take advantage of budgeting tools and convenient banking to make contributing easier. Explore our Personal Banking solutions to set up an account today or stop in at one of our local branches for friendly, in-person service and be financially ready to handle life’s surprises in 2025 and beyond.