If you are looking to achieve financial security, building an emergency fund is an essential tool in your financial toolbox. Not only do emergency funds provide stability in case the unthinkable happens, but a peace of mind knowing you have financial backing set aside. Join us as we dive into a how-to guide to the basics of building an emergency fund! 

What is an Emergency Fund? 

An emergency fund is a pool of funds set aside in case of an emergency. No, this fund is not a savings account for a splurge purchase. Emergency funds serve to cover unexpected expenses that may arise such as a medical emergency, job loss, home or car repair – anything that arises unexpectedly that you haven’t properly budgeted for. 

How Do I Build an Emergency Fund? 

Building an emergency fund is an essential tool for anyone at any age. An emergency fund is customized to your lifestyle, including factors such as your living situation, income, family situation and lifestyle. Here are some steps you can take to build an emergency fund:

1. Determine how much you need in your emergency fund: 

  • Determining how much you need in your emergency fund isn’t a set amount for everyone. As a rule of thumb, financial experts recommend setting aside three to six months' worth of living expenses in your emergency fund. 
  • It is important to account for your personal circumstances. If you are a single individual, your emergency fund will look different than say a family of four. Every individual’s circumstances will vary based on factors that could instantly affect their financial situation. 

2. Start with small, short-term goals:

  • If you haven’t built your emergency fund to where you’d like it, it’s ok. Starting small and setting achievable goals is key to building and boosting your savings. Begin by saving small amounts each week or month to overtime increase to a healthy savings fund.  
  • Saving each week can be completely up to you and as easy as $50 - $100 dollars set aside routinely to get you to a comfortable amount. 

3. Make an automatic effort to save:

  • A huge factor in building your savings is to stay consistent with setting aside your money. The more automatic you can be with saving, the more accountable you will be in the long run to building an emergency fund and building your overall savings. 
  • Making automatic transfers from your checking account to your emergency fund savings account is simple! You can also implement an app that rounds up your purchases and deposits the difference into your savings account.

4. Cut back your expenses:

  • If you find yourself wondering where you are going to find the funds to build an emergency cushion, take a look at your expenses. To free up more money for your emergency fund, look for ways to reduce your expenses such as: 
  • Dining out
  • Canceling subscriptions 
  • Find ways to save on your monthly bills
  • Reduces splurges
  • Refine your budget 

Build Your Emergency Fund with American State Bank

Saving money is an important skill that will help you throughout your life. To avoid dipping into your emergency fund for non-emergency expenses, keep the money in a separate savings account to track your progress toward your savings goal.

American State Bank has the accounts you need to fuel your savings. Contact our team of experts today to discuss a customized saving strategy to help reach your goals!