7 Ways to Build an Emergency Fund

Erin OsterhausFebruary 22, 2024

Reviewed By: The Amplify Retail Team

An emergency savings fund is a cornerstone in any financial plan. Most financial experts recommend putting away cash to cover three to six months of expenses to achieve financial security. With this tidy sum tucked away in a savings account, you can pay for unexpected expenses, such as car repairs, medical bills or an unforeseen job loss without taking on high interest debt, such as credit card debt or personal loans.

But if you’re barely making ends meet every month as it is, how can you build an emergency fund? Here, we’ll go over a few different ways to help you save money and meet your financial goals, even if it feels like building an emergency fund is out of reach.

1. Don’t Give Up Before You Begin

The first step toward achieving any goal, including financial goals, is believing you can do it. Psychology plays a major role in spending and saving. You’ve probably felt that boost of pleasure when you purchase something new, only to experience stress and remorse later at the extravagance of your spending. But then, because it seems impossible that you’ll ever be able to save enough to make you feel financially secure anyway, you decide to buy something new to feel better—and the cycle continues.

If this is you, you’re not alone. In a survey by the American Psychological Association, findings showed that 72 percent of Americans reported feeling stress about money. It’s important to remember that the high you feel when making new purchases is only temporary. The best way to relieve stress around money is to be more intentional about what you buy and save, and building an emergency fund to help you weather tough times is one of the most effective ways to lower stress levels.

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2. Set Small Goals

Believing you can create an emergency fund is the first step, but to set yourself up for success, it’s best to set small, achievable goals. For example, if your average monthly expenses total $3,000 per month and you start with a goal of saving six months of expenses, that’s $18,000! Such a large sum might seem so unattainable that you slip back into old spending habits. Instead, start with smaller goals. Try to save enough to cover expenses for just a month—or even a week. Saving $3,000 for a month or $750 to cover one week of expenses seems much easier than piling up enough cash in your savings account to cover six months of expenses.

3. Automate Savings

Another great way to save—even when it feels like it’s impossible—is to automate savings. If you receive your paychecks via direct deposit, most companies offer the option to have your check deposited in different accounts. If you can, take advantage of this option to boost your savings by having a small percentage of your check deferred to your savings account every month. Alternatively, you can set up automatic monthly transfers to your savings account to ensure you don’t forget. It could be as little as $20 per month, but over time that adds up! The key is to make saving a habit, rather than an ongoing struggle.

4. Maintain Spending Levels

Saving and spending are two sides of the same coin. Once you start saving, it’s essential to keep your spending in check. Just because you have some money in the bank, don’t get complacent and think you can afford to treat yourself to a large, expensive purchase. This doesn’t mean you should deprive yourself while building your emergency fund, but make sure you don’t lose sight of your ultimate goal: financial security. Will the thrill of a brand-new pair of shoes outweigh the stress you feel when you have trouble paying the bills? When you’re mindful of your spending, saving becomes much easier.

5. Save Windfalls

Just as expenses can come unexpectedly, so can income. If you receive a bonus at work, inherit money from a relative, or get a tax return that is larger than you anticipated—put some of that cash toward your emergency savings fund. It may be tempting to spend large windfalls on items or experiences you’ve had your eye on, but don’t lose sight of your long-term goals. By putting aside even a portion of unexpected cash, you can reach your savings goal faster and be closer to a stress-free life.

6. Let Your Money Work for You

It’s important to keep your emergency savings in an easy to access bank account—after all, you’re saving it so you can use it in a pinch. However, that doesn’t mean you have to settle for extremely low or no interest rates. Seek out high-yield savings accounts that allow your money to grow every month without requiring you to lift a finger. And the best part: if you leave your money to grow, you’ll begin to experience the wonders of compound interest.

7. Track Your Progress

Once you’ve overcome the mental obstacles to start saving—even if it’s just a few dollars every week or month—find a way to track your progress. You might consider setting up an automatic notification of your account balance or writing down your balance or total contributions at the beginning of every month. Writing down every financial goal you meet is a great way to celebrate all of your victories. By incorporating a means to see your progress on a regular basis, you’re more likely to experience a sense of achievement and be motivated to continue on your savings journey.

Celebrate Your Successes

When you’re disciplined with your savings, it becomes a habit—one that you can maintain over the course of a lifetime. But just because you’re saving doesn’t mean you can’t enjoy life. In fact, by recognizing what you’ve accomplished, you’re more likely to continue. Look for ways to treat yourself every time you achieve a goal, and then set your next one. With steady progress, you’ll be able to reach your emergency savings goal sooner than you think and set yourself up for a life of less stress and more financial security.

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Erin Osterhaus

Erin is a personal finance writer based in Austin, Texas. Her work has been featured on TechRepublic, Yahoo Small Business, and Entrepreneur.com. She’s been passionate about helping others manage their money since she successfully paid off $60,000 in student loans in four years. When she’s not writing, Erin loves reading, studying languages, and spending time with her family.