3 Steps to Strengthen Your Emergency Fund

You have an emergency fund. But, perhaps it’s not what you want it to be. You wish you had more money in it. You wish it was more easily accessible. You wish! Today, let’s explore how to actually strengthen your emergency savings!

Why an Emergency Fund?

Why are emergency funds so very important in the first place? Let me list the reasons:

  • They protect you from income loss from losing a job. With the unemployment rate high, job loss can happen to you! Most likely it won’t in the short term (the odds are in your favor), but if it does, you don’t want to cut back on your essential expenses.
  • They protect you from high medical expenses. Medical expenses are one of the most commonly cited reasons for bankruptcy or other financial troubles. If you break a leg, you’re going to want to have health insurance. But health insurance only goes so far! That’s why it’s so crucial to ensure that you have an emergency fund in place to soak up those costs.
  • They help you cover truly unexpected expenses. Anything can happen. There are so many more things that can happen other than medical expenses that can drain your bank account. Don’t get caught off guard!
  • They help you find financial peace. The simple idea that you have thousands of dollars in the bank will help you relax, have less stress, and grant you the ability to focus on what you really need to: your income.

3 Steps to Strengthen Emergency Savings

There are basically three things you need to analyze about your emergency fund, and then make the appropriate changes. You might not need to do all three, but you need to at least address all three.

  1. Determine how much money you need in your emergency fund. How much do you currently have saved up for an emergency? Do you feel it is an appropriate amount? Many financial experts have recommended 3 to 6 months worth of expenses. The main question you should ask is: How much money do I need to survive for [fill in amount you are comfortable with] months if I were to completely lose all income? After you have determined how much money you need, move on to the next step.
  2. Determine the location of your emergency fund. This isn’t always easy. While it can be tempting to find the savings with the highest interest rate, this isn’t always the best location if it isn’t easily accessible. Your emergency fund should be liquid and easy to access. However, you don’t want your money in a place that you’ll be tempted to take the money out for non-emergency situations. It’s a good idea to have a few barriers to having access to the money. Try a money market account or savings account such as ING Direct.
  3. Determine your rate of savings and emergency fund prioritization. How much money over what period of time will you save? Make sure to make your goal as specific as possible. It also helps to know when to start funding your emergency savings account. How high up on the priority list is your emergency fund? See Dave Ramsey’s 7 Baby Steps for some great ideas on when to start saving for emergency scenarios. Most people should be able to save up to a fully funded emergency fund in 2 years or less if they get intense about it! Also, make sure to find new ways of quickly saving up money.

There you have it! Now you are on your way to strengthening your emergency fund. Remember to review your emergency savings periodically to make sure you maintain the desired about of money and that everything is going smoothly.

How much money do you have in your emergency savings? What changes do you need to make to your emergency fund? Meet us in the comments!

  1. Nate Hall


    Great points here. For some reason, it seems that the emergency expense can be overlooked, yet it is really important to have. I would also say adjust another category in the budget if needs be to make sure and have an emergency fund. It’s kind of like paying for insurance, you’ll never know whether or not you need it, but it is just as critical to have.

  2. Tim @ Faith and Finance

    We’re currently sitting at about 5 months of expenses in our emergency fund. It certainly takes the pressure off in terms of worring about the unexpected.

    I’d recommend separating the emergency fund from other accounts – to make it more difficult to access. That extra step helps if you’re trying to decide if something is really an emergency.

  3. Ryan DeLeon

    An emergency fund is the seperation between you and debt. It’s what keeps you from epic failure. It turns an emergency to an inconvenience. When you have $10,000 sitting in the bank, and the A/C goes out, you just take care of it. It really does give you a sense of peace.

  4. David Hunter

    E-funds are probably the most important part to financial independence!

    My wife and I have a small e-fund, but it definitely gives us peace of mind.

  5. Are there any ways that we could do guys? I need more idea about this. Hope that you could help me.
    By the way, nice article! This can be really helpful.