How to Build an Emergency Savings Fund [In-Depth Guide]

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the millennial money woman blog post "emergency savings fund"

In this article

Key Takeaways

  • Keep your emergency fund locked away in cash so it’s readily available
  • Gain competitive interest rates by saving in a high-yield savings account
  • An emergency savings fund is equal to 3-6 months’ worth of living expenses

Introducing: How to Build an Emergency Fund


Guys and gals – this is going to be likely a very important (albeit short) blog post. 

It’s about your emergency savings funds.

I urge you not to skip over reading this post, as having an emergency savings fund really can get you out of emergencies. 

Trust me, it has helped me in the past to avoid resorting to credit card financing.

"This “fund” that we’re talking about doesn’t have to be tens of thousands of dollars."

That’s because every emergency savings fund will be different – based on your job, your income, whether your partner earns money, your monthly living expenses, etc. 

You get the picture.

the millennial money woman blog post "american emergency savings fund statistic"

Image: The Millennial Money Woman | Source: CNBC

Some facts about emergencies and emergency savings, as taken from a recent Bankrate survey:

  • The average emergency costs around $3,500
  • About 28% of Americans undergo an emergency each year
  • 37% borrow money in some capacity if hit with an unexpected bill
  • About 15% of Americans surveyed believe they will be in debt for the rest of their lives
the millennial money woman blog post "statistic of How Americans would Pay for $1000 Emergency"

Image: The Millennial Money Woman | Source: Bankrate

In my opinion, these statistics are shocking. 

Let’s assume you are already in debt [not including your mortgage]:

  • $28,000 in credit card debt

Let’s also assume the following:

  • You’re making minimum monthly payments
  • You just had a flat tire [$500]

How do you expect to pay for that flat tire cost without using your overcharged credit cards again? 

That’s the problem that most Americans face today – unfortunately.

"Instead of dipping into a savings fund to pay off a surprise emergency cost, the average American likely resorts to debt financing in the form of credit cards."

And that’s why I’m writing this blog post today: to help you understand why emergency savings funds are important for your and your family’s financial sanity and further help you stay out of credit card debt

(And thus, not paying those egregious credit card interest rates, which often can range over 20%).

Are you looking to pay off your credit card debt faster and save money in the process? Check out Tally.

Here’s what Tally can do for you if you have credit card debt:

  • No high APR’s
  • No high late fees
  • Pay off debt faster 
  • Save about $5,300 (average life savings)
the millennial money woman blog post "emergency savings fund definition"

What is an Emergency Savings Fund?


As I mentioned earlier in this post, maintaining an emergency savings fund is a customized choice for your specific situation.

Since we’re sadly not talking face to face, I can only give you the parameters of what the suggested amounts are to maintain in an emergency savings fund.

First, let’s say that you are a single, independent working individual. 

In other words, there is no one dependent on your income stream (no significant other, no child, no parents, etc.). 

You are single & have no dependents:

  • Track all monthly expenses
  • Multiply your monthly expenses by 3 
  • You should be saving about 3 months’ worth of your monthly living expenses

Now keep in mind, you may prefer to have more saved in your emergency savings fund than just 3 months of your monthly living expenses. 

That’s perfectly fine. 

But to be fair, the minimum recommended emergency savings amount for your situation (assuming you are single and don’t have any dependents) would be 3 months.

"What this means is that you should have an emergency savings account equal to 3 months of your expenses locked away and in cash, specifically only with the intention of using the account for emergencies."

The reason why I say cash, not stocks is because you want to have your emergency savings fund readily accessible in the case of an emergency. 

Often, if you want to use the money you have invested in stocks or bonds, that could take a few days to settle. 

Even worse: Depending on the liquidity of the investment fund you have your money in, you may have to wait several weeks or months.

You have to make that promise to yourself. 

It should not be your vacation fund account. It should not be your business clothing fund account. 

It is literally your emergency account. 

For unexpected (typically bad) expenses.

Some examples of emergencies include:

  • A flat tire
  • Losing a job
  • A leaky roof
  • Medical bills
  • A broken-down car

Now, it’s a different situation if you have a partner or kids for example depending on you and your income to maintain a certain standard of living. 

Even if your partner has a good-paying job, it’s actually better to be safe than sorry, and by that I mean to save about 6 months’ worth of your living expenses in cash, in an emergency savings account.

I say, prepare for the worst, hope for the best. 

how much should i have in my emergency savings fund

How Much Should I Have in my Emergency Savings Fund?


Let’s say you have a few hundred dollars in cash and in a 
savings account that you decided to dub your emergency savings fund. 

Let’s also say you found out that you need to save about $6,000 to equal 3 months’ worth of your living expenses.

How do you build up your current emergency savings account to match the number you calculated you would need to maintain an adequate emergency savings fund?

Save absolutely every last penny you have toward your emergency savings fund.

That includes:

  • Bonuses
  • Birthday or holiday money
  • Reduce discretionary expenses and move “saved” money to your emergency fund 
  • Take up a side hustle and save that money toward your emergency savings account
  • Consider looking for a roommate and use the extra income toward your emergency fund

If you’re new to saving and are wondering which savings account you should open to allow your cash to grow – make sure you select a high-yield interest savings account like CIT Bank.

CIT Bank offers:

  • Competitive interest rates
  • Does not have monthly fees
  • Easy-access bill pay features

An emergency savings fund means you’ll see a couple of extra bucks in your pocket!

"Now you have the secrets to start reaching your magic emergency savings account number. What are you waiting for?"

Closing Thoughts


Don’t be one of the 57% of Americans who are unable to afford a $500 emergency. 

Be better than the statistic. 

And save yourself those ugly and terrible financial worries. 

Start building your emergency savings fund – pronto!

If you follow my simple rules to:

  • Figure out how much you need to build your emergency savings fund
  • Start strategically saving toward your customized emergency savings number

You will have peace of mind, a safety net, and you won’t have to resort to debt financing through your credit cards.

Work hard now to build that emergency savings fund and your bank accounts will thank me later!

Do you have an emergency savings fund in place? If so what were the guidelines you followed?

Related: How to Create a Budget
Related: How to Stop Spending Money

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Fiona Smith
Fiona Smith
The Millennial Money Woman was founded by Fiona Smith. She holds her Master of Science Degree in Personal Financial Planning and has co-founded a local non-profit community teaching financial literacy to young professionals.

4 thoughts on “How to Build an Emergency Savings Fund [In-Depth Guide]”

  1. This is a great topic to share. I have specific line item in my budget for $100(ish) allocated time it.

    I recently reallocated that contribution to another investment, as it is pretty fat. As a family man, I am more conservative and try to have 8 months in savings.

    Curious to know what other families have stored for a rainy day

    1. Thank you so much for your comment and feedback! You said it – even $100 per month allocated toward your emergency savings fund can rapidly increase the existing cash for potential future emergencies. I think you make a great point as well: when you have satisfied the amount needed to fully fund your emergency savings account, it’s probably best to start investing that money!

  2. Totally agree that an emergency fund is important!
    We have about 6-8 months always set aside – in the offset account, offsetting the mortgage, double win there!
    Great advice 🙂

    1. Thank you so much for the great feedback! I’m happy you found this post helpful. I completely agree that having 6-8 months is a fantastic balance for your emergency savings fund. Hopefully more people take this advice to heart… this type of account can certainly help some people avoid debt financing!

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