Guides / Saving
Building an emergency fund
An emergency fund is money set aside only for unexpected costs, like a car repair, a medical bill or a lost job. It keeps one bad month from turning into credit card debt.
The key ideas
- Start small
- A first goal of $500 to $1,000 covers many common surprises. Reaching it builds the habit.
- Full target
- A common guideline is three to six months of essential expenses: housing, food, utilities, insurance, transportation and minimum debt payments. Aim higher if your income is irregular.
- Where to keep it
- Somewhere safe and easy to reach but separate from everyday spending, such as a federally insured savings account.
- Automate it
- Set up an automatic transfer on payday, even a small one. Pennies really do add up when you don't have to remember.
- Refill after use
- Using the fund is the point. Pause other extra goals until it is topped back up.
Questions to ask yourself
- What are my essential monthly costs if I cut everything optional?
- How stable is my income, and how long might it take to replace?
- Do I have any windfalls coming, like a tax refund, that could jump-start the fund?
Free help
- America Saves
- A free nonprofit campaign with savings tips and pledges at americasaves.org.
This guide is general education for US households, based on how things typically work. Rules, rates and program details change and vary by lender and state. It is not individual financial, legal or tax advice, and it isn't an offer of credit. Pennies & More isn't paid by any lender or company mentioned here.