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How to Build an Emergency Fund

How to Build an Emergency Fund

By Kia Jackson • July 08, 2020

Wouldn’t it be great if life always worked out as planned? The unfortunate reality is that life is full of unexpected events, some of which can put you in financial trouble if you don’t have the extra money on hand to handle them. According to a 2019 report by the U.S. Federal Reserve, 37 percent of adults revealed they could not cover an unexpected expense of $400 in cash, with most reporting they would use credit cards or borrow from friends to cover the expense.1

Without an emergency fund to fall back on, unplanned expenses like house repairs and car trouble — or worse, sudden unemployment — could leave you unable to pay bills and make you more likely to take on additional debt. That’s why building an emergency fund is not only important, it can be a lifesaver.

The thought of putting money aside for emergencies may seem like a tough task, especially during economic uncertainty. But any amount you save could make a big difference when you really need it — and could reduce the stress of a financial hardship.

Here are a few tips to help you learn how much money you should have in your emergency fund, how long it should take to build an emergency fund and how to use tools like a budget calculator to reach your savings goal:

1. Calculate your emergency savings goal

How much should you have in your emergency fund? Ideally, you should have six months of living expenses saved up, according to If you’re unsure how much your living expenses are, add up every bill you regularly incur each month such as housing, utilities, health care, gas, insurance, child care and groceries.

Once you know your monthly expense total, multiply it by six. For instance, if your expenses add up to $4,000 a month on average, you should have around $24,000 stashed away in your emergency fund.

If this savings goal seems a bit high, consider creating a budget to help manage and monitor your expenses. This free online budget calculator can help you see where your money goes every month, which expenses can be reduced or eliminated and how to save more money.

2. Decide where to keep your fund

While emergency funds should be reserved for true emergencies, you still want your money to be within reach when you need it. Be sure to keep your money in an account that’s completely separate from your everyday checking account, but also offers easy accessibility. From a high-yield savings account to a Roth IRA, there are a number of options to consider when deciding where to keep your emergency fund.

3. Treat your fund like another bill

We’ve all heard the expression, “Pay yourself first.” One of the most recommended ways to do so is to set up automatic transfers from your checking account. Or better yet, find out if your employer offers direct deposit into two accounts, sending a few dollars of your paycheck to your emergency fund account automatically. You’d be surprised at how fast even the smallest contributions add up.

If you’d rather not set up automatic deductions, make sure you treat your emergency fund as you would any other expense — it’s another bill that you have to pay monthly. Most banks make it easy to transfer money from your checking account into other designated accounts.

4. Stick to it and adjust as needed

With savings, any progress is good progress. So no matter how long it takes you to fund your emergency savings, just know that you’re headed in the right direction and will get there as long as you stay committed to your goal. And if you encounter a few bumps along the way, make adjustments as needed and focus on saving what you can, when you can, until you rebound.

5. Look for additional ways to make more — and save more

The more money you make, the more you can set aside for your emergency fund. If your current employment isn’t providing you with the income necessary to save as much as you’d like, maybe it’s time to explore new ways of generating income.

Use your experience, skills and interests to make extra money on the side as you work toward building your emergency fund. It doesn’t have to be a permanent side hustle, just enough to get you closer to your savings goal.

And once you’ve saved up your emergency fund, commit to using it as a last resort for emergencies only — meaning you and other family members are clear on what defines a “true emergency.” That way, when you really need it, you’ll have peace of mind knowing you have the cash to handle it, pay your bills and keep moving forward.

Want more information about building your emergency fund?
“OneMain Try this free online micro-course to get you started.

This article has been updated from its original posting on April 13, 2016. Matt Diehl contributed to this post.

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The information in this article is provided for general education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. It is not intended to be and does not constitute financial, legal or any other advice specific to you the user or anyone else. The companies and individuals (other than OneMain Financial’s sponsored partners) referred to in this message are not sponsors of, do not endorse, and are not otherwise affiliated with OneMain Financial.