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Most people know having some savings is a smart money move, but don't have enough stashed away.

Learn the smart way to build and grow your emergency fund!

How to Build and Grow Your Emergency Fund

Having a financial cushion is a goal of many families as they are building their finances.

Emergency funds are essential buffers when unexpected things happen, such as job loss.

How, though, can you get started with it? What do you need to do to protect yourself?

You can watch me break them down in this week’s Marriage and Money Tips or check out my take right below!

How Big Should Your Emergency Fund Be?

The first thing many people wonder about is the right amount for an emergency fund.

Most financial gurus recommend you have 3-6 months of expenses in your account.

If you're looking for something more tailored to your family's needs, then there are several factors to consider when determining your emergency fund.

  • Family Size – If you're a dual income couple with no kids or other family obligations, then you'll probably won't need as a big of en emergency fund as a family of 5.
  • Family Expenses – Your family's lifestyle has a big effect on the size of your emergency fund. If you have high monthly expenses, then logically, you'll need more money to save. If your expenses are due to unnecessary spending, then you may want to discuss ways you can lower it. If it's due to circumstances (i.e. medical bills), you'll have less room to work with. It's still possible though to explore options to lower your bills.
  • Income Streams – If you have 2 or more income streams coming in, that can decrease the size of your emergency fund. You should still have one though, as unexpected events can happen.

If you're still stumped than shoot for 3 months worth of expenses. Should you lose your job, your family won't have to panic as you try to find employment.

If you're in debt, please have a starter emergency fund on hand before you go ahead and pay down your debt.

Most people know having savings is a smart money move, but don't have enough stashed away. Learn the smart way to build and grow your emergency fund! #savings #family #money

Where Should We Save Your Money?

The next decision you two should make is where you need to deposit your money. With an emergency fund you need to focus on 3 things:

  • Easy access to it in case of emergency – It does you no good to have a high-interest rate if you can't get to it quickly when it's most needed.
  • Safe place to store you money – Whatever you choose, make sure it's either covered by the FDIC (banks) or NCUA (credit unions).
  • A place where it can grow – If you can earn a decent interest rate for your savings while meeting the two previous criteria, then go for it.

Here are some brief thoughts on some of the top places to open your account with. Look around online to compare savings accounts.

You should be able to find something to suit your needs.

Credit Unions and Community Banks

Since credit unions are nonprofit and member-owned, you can usually get a competitive rate on your savings accounts.

We use Coastal, a local credit union, for some of our savings and have been really happy with them.

Online Banks

If you do most of your banking from your phone or desktop, then looking at online banks for your savings is a smart move.

Without the overhead of branches, they can offer higher rates on their savings accounts. Here are a few popular options:

Find what works for you and stick with it.

Finding the Money to Build Your Emergency Fund

So you're fired up. You know how much money you need to have in savings and where to put it. Now you're looking for ways to get money for it. How do you do it?

It's not glamorous and for some, it can be painful, but the first thing I'd recommend is cutting back on unnecessary expenses.

Let's face it, for many people (myself included) living beyond their means is why they are living on a tight budget with little or no savings.

I had to face the facts and change my spending habits. My husband was a tremendous help and together we were able to simplify our lives (while still enjoying it).

Another wonderful option that can really jump-start your emergency fund is selling all your clutter.

You'll clean up your house, make some cash, and you won't have to reallocate your monthly cash flow.

If you're serious about making some money, Baker has just release a guide to turning your clutter into cash.

Continue Saving While Paying Down Debt

Once you have a starter emergency fund ready, you may feel like you should go full throttle on paying down your debt, as Dave Ramsey has encouraged people to do.

I suggest that you continue to set aside some money for building up your emergency fund at the same time.

Debt Free Adventure has a wonderful 75/25 method accomplishing both without burning yourself out.

Thoughts on Building an Emergency Fund

I'd like to hear your thoughts.

How have you been able to work as a couple and build your emergency fund? What other financial goals are you tackling together?

About Elle Martinez

Elle Martinez helps families at Couple Money achieve financial freedom by sharing tips for reducing debt, increase income, and building net worth. Learn how to live on one income and have fun with the second..

5 comments add your comment

  1. Thanks for covering this so thoroughly Elle. In the past few weeks I have had budget creation meetings with my mom and her friend, and I also began leading a Financial Peace University course at my local church. In all of this I was bombarded with the utter requirement of establishing and building the Emergency Fund. People REALLY need to grasp the importance of this concept to ensure they can get a handle on their Personal Finance situation!

  2. @Matt: Wish you the best with the FPU class! Getting an emergency fund started is so crucial. No one anticipates having an emergency until it happens. It be such a financial and emotional setback if they don’t have SOMETHING saved up.

  3. Joe at Personal Finance By the Book has a good post running about taking a part time job. Maybe this would be an ideal solution for building the savings reserve. A temporary agency can usually help a person find a job that would last 3 or so months.

  4. Having an emergency fund is essential, and I believe that no person should be without one. Even if you are in debt, try to have at least one month and then passionately pay of debt and then build up a full EF!

  5. My husband and I have an emergency fund in a money market account, but I also have a mini- emergency fund built into my personalc hecking account – we have a joint account for bills. I keep an extra $500.00 in it that doesnt show in my check register (so I am never tempted to use it needlessly) and when I reconcile with the bank, I know there should be a $500 difference. This ensures that I will never overdraw and if I ever find myself in a temporary tight spot (i.e.- on travel and lose credit card). $500 should get me thru the worst of it until I can get access to other funds, cards, etc.