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How to Start an Emergency Fund

An emergency fund is vital for creating a financial buffer, which helps you in times of crisis. You need an emergency fund to avoid relying on taking out high-interest loans and credit cards.

It is also very beneficial when you don't want to borrow money from banks and lenders. So, to avoid more debt, you must start an emergency fund. In today's article, we will tell a step-by-step process for starting an emergency fund. Read on!

Step 1: How much you want to save

The first step is always about deciding how much money you want to put in your emergency fund. People can give you their opinions about the fund. For example, some people would suggest saving $1,000, and others may recommend more than that. However, you are the one who will make the ultimate decision. So, ask yourself how much you will need to secure yourself financially.

Step 2: Calculate your monthly expenses

Make a comprehensive list of your monthly expenses, which includes housing costs, utilities, food, debt repayments, insurance, energy bills, and transportation costs. Create a budget worksheet to organize everything accurately. For example, if you need to cover $3,000 in monthly expenses for two months, you will have to set aside $6,000 in your emergency fund.

A guide on starting your emergency fund

Step 3: Open a Saving Account

After you have calculated the amount for your emergency fund, you need to decide where you are going to keep your money. You can easily access your money by opening a savings account. Some people suggest opening a money market account and short-term certificates for deposits. We think any of these accounts will give you the much-needed liquidity, and you can still earn some interest. Think about it and make an informed decision.

Step 4: How much you can afford to save

It is not easy to build up an emergency fund overnight. Although frugal living can help you save some amount and you can put that money into your savings account, you have to look over your finances.

Doing so will help you determine the amount you can afford to put in your emergency saving account each month. It is not necessary to go hard on yourself and put thousands of dollars in your savings account. Even if you save $50 a week, you need to put that money in your emergency account.

Step 5: Stick to your emergency fund plan

After you have created an emergency fund plan, you must stick to it. For many people, it is the most challenging part of saving money. So, your goals for starting an emergency fund must be realistic and achievable. Set up an automatic transfer of a specific amount from your current account into your savings account.


The size of your emergency fund depends on various factors, such as your monthly costs, lifestyle, income, etc. However, experts say that the rule of thumb is putting away at least two months and at most eight months worth of expenses. Remember, starting an emergency fund is an essential component of long-term financial stability. Follow the steps given above to start an emergency fund accurately. Good Luck!

Thomas Moore the a Expert Financial Author with Cash King Thomas Moore is a proud American with a Bachelors Degree in Business Administration from the University of San Diego. He has been in the financial industry for many years holding numerous licenses in multiple states. He currently helps operate cashkingco.com and is our resident expert on all things finance and a great writer. Thomas is also an avid outdoor enthusiast that loves fly fishing streams in the Western United States. LinkedIn Profile