Saving for an Emergency

How to Create an Emergency Savings Fund

Unplanned expenses can derail even the most well-intentioned budgets. A broken air conditioner, car accident or home repair can quickly put you behind on bills forcing you to use credit cards to pay for necessary living expenses like groceries.

Establishing emergency savings is a great first step to ensuring your financial path continues no matter the unexpected hurdle. Here's how to get started:

Set a Savings Goal

Financial experts recommend setting aside 3 - 6 months of living expenses in an emergency fund account. But, when you’re struggling to make ends meet, this idea can seem impossible, so break the goal down into more manageable chunks.

Your first savings goal might be $500 or $1,000 added to your emergency savings account over the next 12 months.

Open a Dedicated Account

Once you have a savings goal, open an account for your emergency savings. Do not co-mingle other funds with this account. A separate savings account will help you see your savings progress and ensure the money is there when needed.

Pull Extra Money from Fixed Expenses

Eliminating unnecessary spending will free up cash each month and allow you to save. Look at student loans, auto loans and credit cards and see if you're eligible to refinance.

Automate Your Savings

Set your checking account to automatically transfer the money saved each month from reducing expenses and deposit it into your dedicated emergency savings account.

For more tips on saving for an emergency, see our post, "Building Emergency Savings When Living Paycheck to Paycheck."