How to Build an Emergency Fund for Financial Security

An emergency fund is a savings account that you use only in case of an emergency. This way, if your car breaks down or you lose your job or something happens to your house, you have money set aside to cover those expenses. It's a way to protect yourself from going into debt with high-interest credit cards or loans when life throws curveballs at you. 

But building an emergency fund isn't always easy—especially if you don't have much money coming in. That's why we've compiled these tips for building up an emergency fund:

Use the 50-30-20 budgeting rule to build an emergency fund.

The 50-30-20 budgeting rule is a great way to get started with an emergency fund. This rule divides your income into three categories: 50 percent for needs, 30 percent for wants and 20 percent for savings.

The first step in using this rule is identifying your needs (the necessities of life). This can include food, shelter and clothing. The next step is determining what you would like but don't need--the "wants" category. 

Lastly, think about what you could do without if needed--like cable TV or Starbucks lattes every day--to put money toward savings rather than spending it on these extras in order to build up your emergency fund as quickly as possible

Open a high-yield savings account to help you save for emergencies.

If you're looking for a safe place to store your emergency fund, it's best to open a high-yield savings account. A high-yield savings account will earn interest and be FDIC insured, which means that if the bank goes under and dissolves its assets, the government will pay out up to $250k per person in each account holder's name.

If you want more information on how these accounts work or which ones are right for you, check out our guide on how to choose an online bank or credit union.

Save as much as you can, even if it's just $10 per pay cycle.

Don't wait for a windfall, a raise or bonus to start saving. You can't predict when these things will happen and it may be years before they do. Instead of waiting around for something that might not ever come, make saving part of your regular routine.

If you earn $1,000 per month and save $100 each paycheck (which is less than 1%), then it will take about 6 months until you have enough money saved up in an emergency fund. If it takes longer than 6 months for your savings account balance to reach $1k then increase the amount saved as soon as possible!

Choose the best savings vehicle that works for your family.

The best savings vehicle for you will depend on your situation. If you want to build an emergency fund, but also have other goals and priorities, then it's important to choose an account that allows you flexibility and access when needed.

The best savings accounts are those that offer:

  • High interest rates--While many banks offer 0% APY on their savings accounts (meaning they don't pay any interest), these accounts usually come with restrictions on how much money can be deposited each month or year as well as penalties for withdrawing funds early. If this is the case for your bank, look for one with better terms so that your money can grow faster before being withdrawn later on in life when needed most!

  • Low fees--Fees mean less money available for investing which means less financial security down the road so make sure there aren't any hidden costs associated with having the account opened at all times rather than only when needed most urgently (like during emergencies).

Put your savings on autopilot.

Another way to build your emergency fund is by putting it on autopilot. You can do this by setting up automatic transfers from your checking account to your savings account, or even an automatic savings plan that takes a certain amount of money out of each paycheck and puts it into a separate account. 

The great thing about this approach is that it takes the guesswork out of saving; you'll never have to worry about missing a payment because the money has already been debited from your account.

Another helpful tool is using an app like Digit or Qapital (which we'll talk more about later) that tracks how much money you're saving and allows users set goals for themselves based on their current income level.

An emergency fund will help you weather unexpected events and avoid debt.

An emergency fund is a safety net for unexpected events. You may not know what those events are, but they're bound to happen. By having money in the bank and ready to access when they do, you can avoid debt and keep yourself out of financial trouble.

An emergency fund will help you weather unexpected events, such as:

  • A job loss or reduction in hours

  • Medical bills that exceed your insurance coverage limits

  • The loss of your primary car (if you don't have insurance)


Building an emergency fund is one of the best ways to ensure financial security and peace of mind. By saving money for unexpected events, you can avoid high-interest debt from credit cards or other loans. The key to building an emergency fund is starting as early as possible and making regular deposits into it--even if it's just $10 per pay cycle!