7 Tips for Building and Keeping an Emergency Savings

October 3, 2022

Estimated read time: 4 min 29 seconds


The idea of having money in savings is not something I need to sell you on. Am I right? It’s like yummy food; everyone wants it. But according to this article, not everyone has money in savings, or enough to provide much of a safety net.

To set the stage for this here post, let’s have a little chat about the benefits of money in savings, shall we?

Benefit 1:

Money in savings provides a buffer between you and true emergencies. For example, my water heater sprung a major leak last month. Turns out it had been leaking since installation—a cute little trickle which went unnoticed until it started spewing.

9 years ago, the $600 repair fee would have been a big financial stressor. But with a healthy savings balance, it was more of an annoyance.

Benefit 2:

You have a decision runway if you lose your job. If you’re living paycheck to paycheck and lose your job, you have exactly no weeks to waste in finding a new job.

That’s a lot of pressure attached to something that is in large part out of your control! Giving yourself the gift of time to be able to regroup and job search from is invaluable.

Benefit 3:

You can say yes to things that only became an option. I learned this lesson with an e-mountain bike. Until it came up in a conversation last summer, I had not considered getting one. But I could see how much it would enrich my life, and wanted to get one.  

Sure, I could’ve started saving anew for it, but I had savings more than my 6-month emergency fund. What is the point of money if not to have a little fun along the way? Plus, I was still very happy with the amount of money I’d still leave in savings as well as my plan for replenishing it. So I bought it.

The author looking at her new mountain bike
I had just majorly sprained my foot, but nothing was coming between me and picking up this gorgeous bike.

Are we all agreed that those are pretty fabulous benefits? Oh good. I love it when we agree :-) We are getting to tips for saving, but before we do, I should share one caveat.

In this discussion, I am assuming you don’t have consumer debt (credit cards, cars and student loans). You might, and that is okay! I have a lot of experience with consumer debt, so no judgment here. My advice for you would be to save a 1-month emergency fund, then focus on debt reduction.

Anyway, without further ado, here we go.

7 tips for building and keeping an emergency savings

1. Decide how much you need.

Sure, $100,000 would be nice, but let’s start with a more realistic goal of 3-6 months living expenses. How much is that for you? Put another way, how much would you need in the bank to live as you do now for 3 months without income? $20,000? $30,000?

2. Break your goal into smaller goals.

Break your big goal into smaller goals, say, one month's expenses saved. It’s a bit like a big hike. If you only look at the top of the mountain, it might seem impossible or too hard to get to. But if you focus on a particular tree, or a saddle before the summit, it becomes more doable.

See how quickly you can get to Month 1, then Month 2, and so on. This does require figuring out how much you can realistically save per month.

Let’s pretend you’ve already done that and determined you can save $500/mo if you change nothing about your current life. That will take a while to get to even your 1-month goal, so you may decide to make some adjustments to income or spending.

3. Focus on your goal.

Sounds simple, doesn’t it? But if it’s not the #1 thing you’re doing with extra money, your progress will be slow. It will feel like a slog since you’re not making good headway.

If it is your priority, make sure it’s done first and then work with what’s left. This shouldn’t be a painful exercise, since you have taken into account your real expenses, including the things you enjoy in life. Plus, you are motivated by the reasons discussed above.

4. Minimize your emergencies.

Put another way, plan more realistically so you don’t put money in savings that you could not afford to save. This one is important. Well, they all are, but this one is near and dear to my heart.

I tried to save for all of my 20s. But I would always have to dip into it to cover “emergencies.” Things such as Christmas, car repairs, and annual memberships would just "pop up" and the only place I could cover them was from my savings account.

Wham—there went my feeling of accomplishment and my fledgling safety net. By being a lot more realistic about what amount of money you can actually save, you increase your chances dramatically that it can stay there.

5. Organize your money.

Organize your money in a zero-based budget, then check in with it every couple days. This gives you many more opportunities throughout the month to clean up overspending.

You can shift money from other categories instead of doing a bailout from savings at the end of the month. I remember how those bailouts felt; demoralizing and like I’d failed myself yet again.

6. Use savings instead of credit.

Use savings instead of your credit cards for emergencies—you’ll think twice about the spending.

Some clients put things on credit cards even when they have some money in a savings account. They just aren’t sure that they won’t need that cash, and so they put the thing on the credit card and kick the decision down the road.

I get it! I did that myself a lot. The problem is when you do this repeatedly and with many decisions. You get debt that you now pay on monthly which garnishes your monthly income. And it also defeats the purpose of having an emergency savings!

7. Replenishing your savings.

Prioritize replenishing your savings when you do use it. Remember how we set a goal for a 6-month emergency fund? It was so fun.

Once you’ve reached that mark, I'd recommend creating a new category for savings in excess of 6-months. If your 6-month savings ever drops below fully-funded, you can add replenish it to get it back to target.

What do you think? How have you benefited from having a savings account to fall back on? Any other tips you'd add? Happy savings y'all!

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