Anytime, Rain or Shine: Expect the Unexpected by Building an Emergency Fund

September 24, 2024

Job loss. A health crisis. Car repairs. Storm damage. Family emergencies.

No one escapes life's ups and downs. Being hit with unexpected expenses can throw your financial health off balance, but setting up a separate fund for these emergencies can help you get back on your feet.

Don't be tripped up by thinking that you don't make enough money to save for this. Steadily saving even small amounts will count. Here are four important tips to help you start.

Keep it separate. To avoid temptation, set up a separate account to hold your emergency fund. Ask your employer if part of your paycheck can go straight to this account by direct deposit.

Hint: Some people find an "out of sight-out of mind" tactic works best. Don't make your emergency fund easily accessible, such as the ability to view the account's balance from your mobile device.

Set a goal. Think about times when an emergency has occurred and put you in a bad financial spot. Get an idea of how much those expenses were, how much money would have eased that crisis, and set your goal on that basis. Self-control will come more naturally with a specific goal in mind.

Hint: Add up the amount you would need to live on for three to six months if you suddenly lost your job. Make that number your savings goal.

Reward yourself. When good things happen and you receive income that you are not accustomed to, set that aside in your emergency fund. This could be a bonus from your employer, a tax refund, a gift, or even a lottery win.

Hint: This type of income is not planned for, so it is best to put it aside to be used for emergencies. Remember, unexpected income should go towards unexpected expenses.

Replenish as necessary. If you do slip up and dip into your emergency fund, it is important to have a recovery plan in place. You may fall into the habit of pulling from your emergency account without "guardrails" to keep yourself accountable.

Hint: Make sure that you hold yourself responsible for the amount withdrawn. For example, you can pay back the amount you took out plus 10%, as if you are charging yourself interest for borrowing your own money.

Your emergency fund is for your own protection. We all find ourselves in tough spots occasionally. But you can decide to prepare yourself by beginning to build an emergency fund today.

More resources:

PNC | How to Build an Emergency Fund

Ramsey Solutions | A Guide to Your Emergency Fund

Consumer Financial Protection Bureau | Essential Guide to Building Emergency Fund