Unexpected expenses have a sneaky way of showing up at the worst times. Things like car repairs, medical bills or even sudden changes in income are just a few examples of when an emergency fund can really come in handy.
Saving for an emergency fund takes time and perseverance, but the good news is that you don’t have to do it all at once. Starting small and staying consistent can make a meaningful difference. Follow these steps to create an emergency fund that makes sense for your budget and savings goals.
1. Choose your account
A regular savings account or Goal Savings account are ideal for helping you achieve your short- and long-term goals. These accounts give you easy access to your money so you can use it when those unplanned expenses occur. Keeping your emergency fund separate from your everyday spending account can also help reduce the temptation to use it for non-emergencies.
2. Create your budget
This exercise will help you track your spending habits as well as determine how much you can save and where you could potentially trim expenses. Review our four-step plan to help you create your monthly budget. Even small adjustments like cutting back on a subscription or dining out less often can free up extra money to put toward your emergency savings.
3. Establish your savings goals
Use your budget to help guide you. A good rule of thumb is to save enough to cover approximately three to six months of your expenses. Once you establish your bigger picture savings goals, determine how much you will save each month. If that number feels overwhelming, start with a smaller milestone, like your first $500 or $1,000, and build from there.
4. Set up an automatic transfer
Hold yourself accountable. Set up monthly transfers to your emergency fund by using our mobile app or online banking. Automating your savings makes it easier to stay consistent and turns progress into a habit.
5. If possible, increase your transfer amount
Even the slightest increase can help you reach your savings goals faster. Consider transferring extra money you may receive from a raise, bonus or a monetary gift. You can always think of tax refunds or other unexpected income as an opportunity to give your emergency fund a meaningful boost.
6. Define what counts as an emergency
Not every unexpected expense is a true emergency. Knowing the difference can help you protect your savings for when you need it most. Job loss, urgent medical expenses or major home and car repairs typically qualify, while planned purchases or impulse buys do not. Setting clear guidelines helps ensure your emergency fund is there when you truly need it.
Examples to help differentiate
Typically considered an emergency:
Unexpected medical or dental expenses
Urgent car repairs needed for daily transportation
Essential home repairs (like a broken furnace or plumbing issue)
Loss of income or reduced hours
Last-minute travel for a family emergency
Typically not considered an emergency:
Impulse or unplanned shopping purchases
Routine expenses like groceries, gas or utility bills
Non-urgent home upgrades or renovations
Planned travel or events Upgrading devices, vehicles or other non-essential items
When in doubt, ask yourself: “Is this necessary, urgent or unavoidable?” If the answer is yes, your emergency fund is there to help. If not, it may be better to plan and save for it separately.
7. Review and adjust as needed
Check in on your savings goals every three months and consider adjusting if needed. If an unexpected expense forces you to dip into your savings, you may need to readjust your goals and/or deposit amount. Remember: using your emergency fund when needed is why it is there for you, and you can always rebuild it over time.
8. Don’t stop once you reach the finish line
After you reach your target, aim to maintain it. If you ever need to use the fund, make replenishing it a priority—then move any extra savings to your next goal.
Building an emergency fund isn’t about perfection. Every deposit is progress, and over time it can give you more peace of mind and flexibility.
When you’re ready to take the next step, Members 1st offers savings options to help you get started and stay on track. For additional guidance, your free personal concierge is available to help you navigate your goals and plan for what’s ahead.