How to build an emergency fund

An emergency fund is like your own personal safety net. It’s money you set aside for when you need it most.

They always vary in size, because they’re dependent on the specific needs of you and your household. But the common rule of thumb is 3 months’ worth of living expenses - what you’ll need if you’re hit with unexpected expenses, like a major health problem, unplanned home repairs or you miss a few paychecks with a sudden job loss. 

Most financial experts recommend you should have enough in emergency savings to pay your monthly expenses without digging into other savings or relying on credit cards.

Set up a separate fund

As a first step, step up a separate savings fund. Label it as an “Emergency Fund.” A dedicated space, clearly identified, can help focus your efforts and keep it out of reach until it’s really needed.

Many banks offer separate funds within your savings account. Some may suggest a separate emergency savings account. Either way, it's a designation place for your savings goal.

Add to your fund regularly 

Start small if you want. But make it a habit - contribute to your emergency fund on a regular basis. 

Every month. Every two weeks. At whatever level you can afford. You don’t have to build it all at once. Do it gradually. You’ll be surprised how fast it grows.

Add it to your monthly budgeting. Make your emergency fund one of your regular bills. If it’s one of your everyday financial goals, you’ll find it easier to accomplish.

You’ll earn more in interest, too. The more often and regularly you contribute to your fund, the sooner that money starts earning interest. That’s the magic of compounding: the sooner you add to an interest-earning bank account, the more your earnings from interest will grow. 

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                                                                    How to use emergency funds.

Automate your savings

Most banks offer an auto-save service, which transfers funds automatically from your checking account to a high-yield savings account on a regular basis. 

It’s an easy way to build any savings fund. You can set the amount of money and how often. It's like creating a direct deposit for unplanned expenses. Get in touch with your bank to see what’s possible.

Stack the windfalls

Now and then, extra money comes your way. Cash gifts, bonuses at work or even a tax refund can deliver cash windfalls. 

They don’t have to be much. Even if it’s only $10 or $20, you can use extra cash to splurge now - or add it to an emergency fund, where it will start earning interest and be there when you need it most.

There’s a good feeling that comes from building a fund you can rely on. Accomplishment. Relief. Stability. Those are powerful feelings, as strong as solid savings.  

For emergencies only

Your emergency fund is for true emergencies only. It takes discipline and sacrifice to build it up, so when you dip into it, make sure it’s worth it. 

With an unplanned expense, try working within your monthly budget first. Think hard about what you’re spending on - and consider what it will take to replenish those funds. 

A financial plan can guide these decisions, balancing your money management, from credit card balances to your emergency fund goal.

Bright makes it easy

Bright can help you build your emergency fund faster. Based on your goals and what you can afford, we’ll transfer funds for you automatically. 

Unlike standard autosave services, your personalized Bright Plan learns how much you earn and spend, watching how your habits shift, and day by day, adjusts how much to save. It’s a smarter, faster way to save - automatically. 

If you don't have it yet, download the Bright app from the App Store or Google Play, connect your accounts, and set your emergency fund goal. Your personalized Bright Plan will move funds for you automatically. 

When you're ready, your Bright Plan can help you build more of your savings - and invest in your future. It's a new data-smart path to financial well-being.

Recommended Readings:

Difference between a rainy day fund and an emergency fund

Should I Pay Down Debt or Save for an Emergency?