6 Strategies for Building an Emergency Fund

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A well-stocked emergency fund can be a financial lifesaver. If you experience an unexpected repair bill, job loss, illness, or some other unplanned event, an emergency fund can help you cover those costs without the need to panic or borrow money.

Many financial experts recommend saving a minimum of three to six months’ worth of expenses in your emergency fund. And some people feel more comfortable saving six to twelve months’ worth of expenses depending on their situation. Yet according to the Consumer Financial Protection Bureau (CFPB), 39% of consumers have less than a month of income saved for emergencies, and another 24% of consumers have no emergency fund set aside whatsoever.

If you haven’t started building an emergency fund yet or you want to increase the size of your emergency savings, the tips below are worth exploring. Below are six smart strategies that can help you with your emergency savings goals.

Update Your Budget

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Updating your budget can be a great way to find extra cash to build your emergency fund. Many people worry that a budget is about restricting your spending. Yet, in reality, a budget is an empowering plan that can help you make sure the income you earn helps you achieve your financial priorities.

There are many personal finance apps and software you can use to track your spending and plan your budget — either on your computer or from the convenience of your smartphone. And you can even take advantage of bill negotiation apps to help cut your expenses and potentially find extra cash in your budget to use for savings as well.

As you update your budget, make sure to include your new emergency fund savings goal as if it were any other bill. This strategy makes it easier to stay on track with your savings plan and grow your emergency fund at a consistent rate.

Use a Separate Bank Account

Another tip that could help you build your emergency fund is keeping your savings in a separate bank account. Opening a savings account with a different financial institution can reduce the temptation to spend your savings in non-emergency situations. Plus, by shopping around at different banks and credit unions, you have the opportunity to find higher interest rates that could help your savings grow at a faster rate. (See more on this strategy below.)

Open a High-Yield Savings Account

Whether you decide to move your emergency fund to a separate bank or keep the money with your same financial institution, it’s a good idea to earn as much interest as possible on your savings. Therefore, you should consider putting the cash in a high-interest savings account or a money market account that earns a higher annual percentage yield (APY) than a standard savings account.

According to the Federal Deposit Insurance Corporation (FDIC), the average APY on a savings account as of August 21, 2023, was 0.43%. Money market accounts earned an average APY of 0.62% during the same period. Yet some online banks offer interest rates that far exceed these levels — some with an APY of 4.50% or higher.

Recommended High-Yield Savings Accounts

Bank Account	APY	Features	Learn More
BrioDirect High-Yield Savings Account Open Account	4.85% More Info *Annual Percentage Yield (APY) is variable and is accurate as of 11/15/2024. Rate is subject to certain terms and conditions. You must deposit at least $5,000 to open your account and maintain $25 to earn the disclosed APY. Rate and APY may change at any time. Fees may reduce earnings.	$5,000 min. deposit No monthly fee	Open Account
Axos ONE® Savings and Checking Bundle Open Account	Up to 4.86% More Info Earn up to 4.86% APY on savings, and 0.51% APY on checking when you meet requirements.	No minimum deposit No monthly fee	Open Account
SoFi Checking and Savings Open Account Member FDIC Member FDIC	0.50% - 4.00% More Info SoFi members with Direct Deposit or $5,000 or more in Qualifying Deposits during the 30-Day Evaluation Period can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. Members without either Direct Deposit or Qualifying Deposits, during the 30-Day Evaluation Period will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Only SoFi members with direct deposit are eligible for other SoFi Plus benefits. Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.	No minimum deposit No monthly fee	Open Account
CIT Bank Platinum Savings Account Open Account	4.35% More Info Earn 4.35% APY on balances over $5,000. Balances of less than $5,000 earn 0.25% APY. Annual Percentage Yield is accurate as of December 20, 2024. Interest rates for the Platinum Savings account are variable and subject to change at any time without notice.	$100 minimum deposit No monthly fee	Open Account

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Automate Your Savings

Once you decide how much money you want to set aside in your emergency fund each week or month, think about making your savings automatic. Automating your savings can help make sure you follow through with your plans to build an emergency fund. If you leave the cash in your checking account, however, you might be tempted to spend that money on other expenses.

Many banks will allow you to schedule automatic transfers from your checking account to a savings account or investment account. If you receive your paycheck via direct deposit, you may be able to have your employer deposit a certain amount of money into your savings account each pay period as well.

Take Advantage of Bank Bonuses

If you’re looking for out-of-the-box ways to boost your emergency savings, consider opening a bank account that offers a bonus opportunity for new customers. One-time bank promotions can be a great way to earn extra cash (often $100, $200, or more, depending on the offer).

But be sure to read the fine print before you open your new account. You might have to use a specific link or coupon code to qualify for a bank’s new customer bonus promotion. And there are always specific requirements you need to meet to qualify for these types of welcome offers. If you don’t follow the rules, you won’t qualify for the bonus opportunity.

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Work a Side Hustle

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Boosting your income could be another great way to build your emergency fund faster. Yet earning more money at your primary job isn’t always an option.

If you have the time, however, working a side gig or part-time job could also increase the amount of cash you earn each month. Of course, you might not want to work a side hustle forever. Yet committing to extra work for even a limited period of time might be worthwhile if the effort helps you reach your financial goal.

Bottom Line

A well-established emergency fund can reduce your stress and improve your overall financial stability. After you build an emergency fund that you’re satisfied with, you should also set rules regarding how you’ll define an emergency. It’s important to know when it’s okay to dip into your savings and when to leave the money alone.

Think about the financial goals you want to reach after you build adequate emergency savings, as well, and how to keep your money safe in the future. Building emergency savings is an important step in your financial journey, but it’s not the final stop.