How do you start an emergency fund? (2024)

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March 10, 2017 By Jessi Fearon Leave a Comment

When most folks hear that they’re supposed to have 6 months of living expenses saved up in an emergency fund, they start to freak out. I mean, let’s get real – that’s a LOT of dang money. And I get that because my husband and I are working on building up our 6-month emergency fund. So how do you start an emergency fund?

It’s not easy to do but it’s totally possible. And here’s how to make it a reality:

In order to set a goal of fully-funding your emergency fund, you’re first going to have to determine exactly how much money you need to save. In order to figure out your 6-month emergency fund number, go through your monthly expenses, add them up and then multiply by 6.

I warn you, that number will probably be huge – over $10,000 and more likely than not, it’ll be well over $20,000. Don’t freak out, because this is your ending point – it’s how much money you want to build up over time. You’re not going to start out the gate saving that much money.

If you tried to make your starting point $20,000 you would get overwhelmed before you even got started. This is why I suggest picking a small, very doable starting point.

Your starting point should something that you could save within the next 3 months. I personally like the starting point of $3,000 but depending on your situation and level of comfort, you could choose to start at $500 or even $2,000 (this was our particular starting point). You could even go as high as $5,000, but again, the point of this is to not overwhelm you. It’s to get you excited about watching your savings grow.

Yep, you bet you’re going to have put this all in the budget. How much can you afford to set aside from your paycheck towards your starting point? No matter the amount set this amount to be automatically drafted from your paycheck into your emergency fund.

I highly suggest you set your emergency fund up at a different bank than the one you use for your checking account. I prefer online banks for an emergency fund because it can take up to 3 days to get your money. I know that might sound scary but think about it – the delay in getting your money means it better be a real emergency before you go pulling that money out.

Also, with it being at a bank that isn’t your normal bank it keeps it more “out-of-sight, out-of-mind”.

The next thing you’ll want to do is to throw every extra penny you have at your emergency fund. I know you may be thinking “but I don’t have any extra money!” and that may be true, but that doesn’t mean you can’t find some or make some:

• Never spend a bonus again. Anytime you receive a bonus check from work or your tax refund, instead of spending it apply it towards your emergency fund.
• Sell unused items. Most of us have at least one closet full of stuff that we never use and believe it or not, you can rake in a pretty penny by selling that stuff off. Take all the earnings (no matter how big or small those earnings may be) and apply it towards your emergency fund.
• Use “cash back” rewards. We don’t have any credit cards so for us, cashback rewards are slightly different. We use sites like Ebates and Swagbucks to earn “cash back” on our online purchases. If you use one of these sites you could take the money you earn as cashback and apply it towards your emergency fund.
• Earn extra income. I know it’s not fun to talk about taking out a second job, but sometimes it’s necessary to earn extra income to build up your emergency fund or to pay off debt. One of the extra jobs that I did was walk dogs which was a great way to earn extra income, get some exercise in, and spend some quality time with my kids teaching them about work ethic. Your extra income idea could just be freelancing out your professional skills or something more creative. Here’s a list of 10 ways you make more money which includes a break down of how I structured my dog walking prices.

Those are just a few of the things you could do in order to find extra money. It doesn’t matter what you do to make extra money happen, so long as you’re applying that extra money towards your emergency fund.

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