How to Build an Essential Emergency Fund

Theses six tips can help to create a successful plan in building an essential emergency fund.

An emergency fund serves as a safety net for unexpected expenses, including home or car repairs, medical needs or job loss. It helps to avoid “spending shock,” or the sudden need to spend a decent sum of money to cover the unexpected. While having an extra three to six months of living expenses on hand is standard, many people do not have extra accessible cash.

A recent study by the Federal Reserve revealed that around 40 percent of Americans would have trouble covering a $400 unexpected bill. An emergency fund provides a sense of peace and security, so that when unexpected expenses arise, the stress of finances does not add to the situation. You can build an emergency fund with some planning and diligence to ensure that you’re covered during life’s unexpected.

Choose the right type of account.

Your money should be accessible but also should have a chance to grow. Keep it in a money market fund or high yield savings account. Check for interest rates and accounts without monthly fees. Plus, keeping your money in a separate account that you know you should not access, instead of in your checking account or in a cash jar at home, will help avoid sudden unnecessary spending.

Develop a budget.

In order to start saving, you need to evaluate your spending and develop a budget to highlight essential expenses and those expenses that can be cut. You may be surprised at how much you are spending that goes unnoticed. If you can make small changes, from reducing dry cleaning to turning down the thermostat at home, it will help your emergency fund bottom line. Having a budget to follow monthly will help to be aware of spending and to help save money.

Keep your eye on the prize.

If you know exactly what you’re saving for, you’ll be motivated to work toward that goal and stay on course. Calculate how much you need to have in your emergency fund. The term “pay yourself first” is important, so setting up automatic transfers into your savings account will ensure you are making regular payments to yourself toward your goals.

Sell items you do not need.

You probably can think of a few items off the top of your head that you have but really do not need. If you have older children, you may no longer need baby items. If you have exercise equipment that has not been touched in years, it may be time to find it a new home. Whether you opt for selling on an app or at a garage sale, you may be surprised at how much getting rid of unused items can put back into your pocket, or rather into your new savings account.

Get a side hustle.

If a second job sounds too difficult after a full workday, there may be options that make money doing things that are part of your routine anyway. From online product reviewers to ride share drivers, there are ways to make additional money to help boost your emergency fund more quickly. A side job does not have to be permanent but can be a solid source of cash flowing into your emergency fund.

Challenge yourself.

Decide on monthly saving challenges for you or your household. For example, decide not to purchase any clothing for the month, or decide to cook everyday rather than buying takeout. Setting aside some expenses that have come to be routine can challenge you to rethink what is actually essential and what expenses can be eliminated, and therefore potentially save more cash.

Having an emergency fund is crucial. Without an emergency fund to rely on, you could end up in financial trouble quickly if life throws a curveball your way. Putting aside money is not difficult, but it does take diligence and planning. Then, if you run into a situation where you need to use your emergency fund, having set practices in place will make it much easier to save and build it once again. If you have questions about how much money is ideal for you to have in an emergency fund, or about planning for your financial future, contact Bayntree Wealth Advisors at or schedule an appointment with us today!

Bayntree Wealth Advisors provides comprehensive financial planning and wealth management. The Bayntree team specializes in all aspects of financial health, including retirement planning, risk management, investment advice, tax strategies, estate planning and insurance.

Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation.


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