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How to Build Your Emergency Fund

Published: October 28, 2021
Revised: December 23, 2021

Most of us have experienced some sort of financial emergency and it probably won’t be the last time we suffer some sort of money-related setback.

Why does it feel like we’re always unprepared when the next financial emergency hits?

I promise you’re not alone. Did you know a 2020 study from Bankrate.com found that only about four out of ten Americans would be able to comfortably cover a $1,000 financial emergency?

What is an Emergency Fund?

You can think of an emergency fund as insurance.

If you think about it, insurance costs us money to protect us from life’s unexpected events. Well, maybe life’s expected unexpected events.

And as you are aware from Murphy’s Law: if anything can go wrong, it will go wrong.

This could be a sudden car repair, replacing your hot water heater, treating a pet’s illness, or paying your deductible on your next insurance claim.

Whatever it may be, your emergency fund is there to save the day, so you don’t go further into debt when you’re already inside a financial emergency.

How Much Should I Save For My Emergency Fund?

The standard for a healthy emergency fund is to have enough cash set aside to cover between three- and six-months’ worth of basic expenses.

This could include your mortgage or rent, utilities, food, car payment, insurance, gas for your car, and any other expense that qualifies as a “need” in your life instead of a “want”.

Why only these items?

When you can keep a roof over your head, the lights on, food on the table, and you have transportation to get to work or look for a job, your financial emergency will feel more like a financial hiccup.

How Do I Build an Emergency Fund?

Creating an emergency fund can seem overwhelming, especially if you are living paycheck to paycheck.

However, there are a few steps you can take to make things easier for you. Follow these steps and you’ll be on your way to building up that emergency fund in no time!

1. Create a Budget and Stick to It

What gets measured gets managed.

The only way to determine how much money is coming in versus how much is going out is to create a budget. Once you know exactly where your money is going each month, it’s time to start looking for ways to save so you can give your emergency fund a boost.

2. Create a Monthly Savings Goal

To start you’ll need to figure out how much you’d need to cover three to six months’ worth of emergency expenses.

Simply look over your budget and find the needs in your life. Add them up and multiply that amount by six to find out how much you’ll need for six months of emergency funds.

Then, decide on how many months it should take to build your emergency fund and then set the savings goal for that amount.

For example, if you determine your emergency fund to be $10,000 and you would like to have the emergency fund built within the next six months, then your monthly savings goal would be $1,667.

3. Save More Each Month

The first month is always the most difficult. Anytime you try something new, it starts out hard and becomes easier as time goes on. This same principle applies to saving money each month towards your emergency fund. As time goes on, you will learn to become much more creative to boost your monthly savings goal.

a. Sell Some Stuff

Have a garage sale or sell your stuff online. You may be surprised to see how much money you can make by purging items you don’t use any more.

b. Pick Up a Side Hustle

Luckily for those building an emergency fund, there is plenty of opportunity to increase your income through a side hustle. Consider becoming a rideshare driver, delivering food, mowing yards or cleaning pools on the side.

c. Adjust Your Lifestyle

While it’s not the most fun, briefly adjusting your lifestyle so you can build your emergency fund quicker will be worth it. Life will still go on without cable, weekly restaurant visits, or $5 coffees.

d. Adjust Your Taxes

If you consistently get money back after filing your taxes, you can elect to get that money paid to you throughout the year instead of waiting on a refund.

To do this, adjust your tax withholdings by the amount of your refund each year. You can do this using a tax calculator from the IRS to determine how much to adjust your tax withholding so you receive more each month from your paycheck. Use that extra cash to build your emergency fund.

Where Do I Store My Emergency Fund?

The best place to start saving an emergency fund is in a savings account.

The key is to park your emergency fund in a savings account and keep it out of sight and out of mind. Don’t let this money mix in with your checking account. That way your emergency fund doesn’t turn into fancy dinners, new furniture, and trips to Disneyland.


How good would you sleep at night knowing you have $10,000 set aside for emergencies? As we have learned, it’s not if the next financial emergency will occur, but rather when.

Instead of waiting for the expected unexpected to happen to you, prepare for it now and start building your emergency fund today.

Chris “Peach” Petrie is the founder of Money Peach. Money Peach partnered with OneAZ to provide free financial education to members across the state. To learn more about OneAZ’s partnership with Money Peach, click here.

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