Building an Emergency Fund in 3 Easy Steps


Ahh…the emergency fund. There are many reasons why personal finance experts tout this as the first step towards reaching true financial independence. Whether it’s a small fund of $1K or a larger pool of cash that can cover your living expenses for an extended period of time, an emergency fund can mean the difference between coasting through a tough time with your finances in tact or facing financial ruin.

I wasn’t always a believer in the emergency fund. As a naive 20-something, I lacked the discipline and resolve to commit to saving anything, let alone a decent sum of money for those curveballs life likes to toss our way. The result of my clueless behavior? Thousands of dollars of credit card debt and the interest associated with carrying the balances. Thankfully, I eventually saw the light and realized that if I ever wanted to build a stable financial future, I had to stop living paycheck to paycheck. Essentially, having an e-fund was my ticket to smoothing out the bumps along the ride.

Building an emergency fund was no small feat for me. But as I began to sock away small sums of money (/month to start), I noticed that I didn’t really miss the money. Over time, I began to be excited about having money in the bank, and I appreciated being able to do things like fix a flat tire and pay for an unexpected health bill without pulling out the credit card. It was quite a liberating feeling!

If you’re looking to start your own emergency fund, congrats on taking the first step to getting your finances under control. For those times when doubt creeps in or temptation threatens to wipe out your progress, here are a few steps that helped me stay the course:

Automate It

This is the simplest, most effective way I’ve found when it comes to saving and investing. I’ve had auto-debits into a separate savings account for over 8 years now. At first, the withdrawals weren’t much but I’ve worked hard to increase those numbers over the years. By automating the contributions, I’m not tempted to spend the money or re-allocate it elsewhere in my budget. Set up a simple transfer from each paycheck and you won’t miss a beat in establishing a healthy account balance in no time.

Ignore It

This one might sound a bit on the unorthodox side, but it’s exactly what helped me to grow my savings and break my bad habit of spending everything (and more) that I brought in. First, ensure you’ve established your emergency fund in an entirely separate account (I like the online ones that take a few days for transfers to post because they offer me built-in time to truly evaluate if I need that money or not). Next, set up the automated contributions and don’t do another thing. Don’t check balances if you have a hard time not spending. Don’t make transfers that aren’t for true emergencies. Funnel the money into the account and just leave it alone!

Start Small and Be Patient

Just as Rome wasn’t built in a day, neither will your e-fund. Start out slow and contribute whatever you can. It doesn’t matter if it’s $10 or $10,000–you have to start somewhere. Get used to making the automatic payments and not touching the money. Then focus on cutting your expenses or bringing in more money (both if you can!) so that you can increase the amount you’re saving. Know that your actions today are setting up a better tomorrow and be patient with yourself as you move forward. Before you know it, you’ll be sitting on a nice cushion that will give you incredible peace of mind when an emergency does rear its ugly head.

How did you build your emergency fund? What steps do you take to maintain it?

10 Responses to Building an Emergency Fund in 3 Easy Steps

  1. Starting small and being patient is some good advice. Too often people are in a rush to get to a finish line that pretty much never ends. When you build up your emergency fund before you know it something goes wrong and you’re back at square one. Take your time building the money and it won’t be as much of a stressful task as some make it out to be.

  2. I agree. There is not fast track to success, well, unless you win the lottery. Anyway, these are good tips. Take it one step or dollar at a time, increase it as you adjust to your budget and you will have a sufficient emergency fund eventually.

  3. These are some great tips Jen. We automated ours from the beginning and just started small to reach our goal. We still have a bi-weekly deposit going into savings to help continue to build our cash pile.

    • Jen says:

      Automation is part of the reason I was ever able to establish an e-fund. Once it began to build, I was motivated to keep it going so things got much easier.

  4. Great tips here, Jen! Yes, I totally agree that automating it and ignoring it are crucial. And the patience part is another huge factor. Just like debt likely can’t be paid off overnight, either can an EF be built overnight.

  5. Automation and start small are key. We started our fund by first making sure our budget covered savings, 401ks, and emergency funds first then worked our way down. We also made sure to use extra checks, bonuses, and tax returns to help give us a boost to get there faster.

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