How to Start Building an Emergency Fund
Building an emergency fund is a wise financial step that can give you peace of mind and protect you from unexpected expenses. Here’s a step-by-step guide to help you get started!
1. Set a Clear Goal
The primary reason for having an emergency fund is to create a financial buffer capable of covering essential expenses, such as medical emergencies, job loss, or unforeseen repairs, without resorting to debt or jeopardizing long-term savings. Determine how much you want to save for your emergency fund. As a general rule, aim to save three to six months’ worth of living expenses. Consider factors such as your monthly bills, rent/mortgage, groceries, transportation, and other expenses.
2. Create a Budget
We understand that building an emergency fund can seem daunting, especially if you’re living paycheck to paycheck. However, the key is to start small and remain consistent. Even saving a few dollars each week can add up over time. Track your monthly income and expenses to understand your cash flow better. Identify areas where you can cut back on non-essential spending to contribute more toward your emergency fund.
4. Automate Savings
Set up automatic transfers that pull money from your checking account to a dedicated savings account every month. Doing this can help you stay consistent without having to think about manually setting the money aside. Our Digital Banking app makes it easy to manage your finances. You can even utilize the “Savings Goals” feature by creating a financial savings goal and setting up a category, amount, and target completion date to save for.
5. Stay Committed
According to Bankrate’s 2023 annual emergency savings report, less than half of Americans have enough emergency savings to last three months, and 1 in 4 Americans have no emergency savings at all. Building an emergency fund takes time and discipline. Stay committed to your goal, and remember that even small contributions add up over time. If an emergency arises, you’ll be glad to have the funds there, ready to help you through the difficult time.
