Emergency fund 101: a guide to achieving savings goals

Master the art of saving with Dave's guide to Emergency Funds 101. Protect your finances from unexpected hurdles.

Last updated: September 4, 2024

Costly problems always seem to pop up when we’re strapped for cash. Car damage, pet health problems, a leaky roof, and other emergencies can put people in a financial hole that’s difficult to get out of.

An emergency fund is necessary and an important part of an excellent financial plan. It’s essentially your safety net, ensuring you have the money to pay for unexpected expenses and keep you from incurring debt or adding to the debt you already have.

However, starting and maintaining an emergency fund can be challenging. In fact, a recent report found that more than one in five Americans have no emergency savings at all.

Below, we provide a step-by-step guide that demystifies emergency funds and provides helpful tips for starting and growing your own fund.

What is an emergency fund? 

True to its name, an emergency fund is money set aside in a bank account for a rainy day. It covers unexpected expenses, such as: 

  • Car breakdowns: Apart from the costs of having your car repaired, you may also need to spend on alternative transportation, like renting a car or commuting. 
  • Home repairs: If you own a home, the repair costs of plumbing problems, leaky roofs, and large appliance maintenance can be very expensive, especially if your home warranty or home insurance does not cover them. 
  • Medical bills: Even with health insurance, medical care can be costly, especially if you’re seeking treatment from an out-of-network provider or specialist. 
  • Job loss: Losing a job and your regular income can make it difficult to pay bills and make ends meet. 
  • Unexpected travel expenses: If you have to travel unexpectedly, such as for a family emergency or to attend a funeral, you might not have had time to save for expenses. 
  • Pet emergencies: Accidents and sudden illnesses in pets may result in costly vet visits, hospitalization, and medication. 

Ideally, your emergency relief fund should be enough to cover your household expenses for three to six months—that’s enough time to find additional income sources or manage your budget. Saving so much money might seem daunting, but it’s important to remember that when it comes to achieving savings goals, slow and steady wins the race. 

While populating your fund might take a long time, it’s better to start sooner rather than later, and a small safety net is better than none at all. 

Building your emergency fund: Getting started 

When you’re ready to start saving, follow these steps: 

Determine your monthly expenses 

How much money should be in your emergency savings account depends on your income and expenses. The first step to an emergency fund is figuring out your budget: how much money is coming in and going out each month. 

A simple way to calculate your budget is to add up the costs of essential expenses, like housing, transportation, groceries, utilities, education, and childcare. Then, multiply the total amount by three or six, depending on whether your goal is to save three months’ worth of emergency cash or six. The number you get is how much your savings goal for your emergency fund should be. 

Consider opening a money market account or a savings account 

It can be tempting to dip into an emergency fund for things that might seem urgent at the time. However, a tiny crack on your smartphone or a surprise sale from your favorite clothing brand isn’t an emergency. 

One way to avoid this kind of temptation is to put your emergency funds in a regular savings or money market account. The goal is to put your money somewhere accessible but not instantly available to spend. Processing a withdrawal from a regular savings account takes about a day. 

Meanwhile, money market accounts may have strict withdrawal limits, such as allowing only six withdrawals in a month. 

Set small, achievable savings goals 

Does the amount you came up with in the first step seem unrealistic? You can make it more doable and set yourself up for success by starting small. 

It’s best to aim for a month's worth of expenses. If you feel that’s still too much, aim for two weeks. Once you’ve achieved your first goal, you’ll be much more confident shooting for a bigger one. Keep raising your goal amount until, before you know it, you’ve gotten into the habit of saving. 

Put saving on autopilot 

It can be hard to remember to save money, so why not automate the process? There are many ways to do so. Look for a checking account with a round up feature, which automatically rounds up your everyday purchases to the nearest dollar and saves the change for you. 

Another popular method is to reach out to your employer and ask them to set up a direct deposit. When filling out the direct deposit paperwork, indicate your savings account details as well as your checking account information. You can choose the amount of your monetary contribution, either a dollar amount or a percentage of your paycheck, to automatically be deposited into your savings account when you get paid. 

Make the most of financial windfalls 

A financial windfall is a sudden or unexpected increase in your finances. Examples of financial windfalls include a bonus at work, inheritance from a relative, cash gifts, or a lawsuit settlement.

While it might be tempting to use the money to treat yourself to a shopping spree or a vacation or spend it on a significant purchase like a new car, a wiser approach is to put it in your emergency fund. If you can’t save the entire amount, at least set aside a significant portion. 

Boost your earnings 

If it’s difficult to cut your spending and have enough left over for your emergency fund, consider boosting your earnings by getting a side hustle. Thanks to the shared gig economy, there are many ways to earn extra cash. Some examples are: 

  • Becoming a rideshare driver
  • Taking paid surveys on a reputable site or app 
  • Becoming a dog walker or a pet sitter
  • Doing freelance work online 
  • Selling your gently used clothes online
  • Making deliveries for food delivery apps 

When looking for a side hustle, be sure to do your research to avoid money-making scams. Fortunately, plenty of trustworthy sites offer legitimate ways to earn money so you can achieve your savings goals more quickly. 

Start your savings journey with Dave 

Get the help you need to save efficiently and intelligently with Dave. Dave is a mobile app-based digital banking service , with banking services available from its banking partner, Evolve Bank & Trust, which is FDIC insured. Members have access to  a range of solutions on their savings journey, from an ExtraCash (TM) account, offering up to $500 with the option of no transfer fee,1 to a Goals high yield account, with a 4.00% annual percentage yield (APY).2 You can also take advantage of 4.00% APY when you sign up for a Dave Checking account, allowing you to earn extra when you have money left over at the end of the month.2

Download the Dave banking app to learn more and start saving effortlessly today.




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1Dave is not a bank. Banking services provided by Evolve Bank and Trust, Member FDIC, or another partner bank, which issues the Dave Debit Card through a license from Mastercard®. ExtraCash amounts range from $25-$500, typically approved in 5 min, with an overdraft fee equal to the greater of $5 or 5%. Multiple overdrafts may be required. Not all members qualify for ExtraCash and few qualify for $500. ExtraCash is repayable on demand. Must open an ExtraCash overdraft deposit account and Dave Checking account. Up to $5 monthly membership fee for ExtraCash, Income Opportunity Services, and Financial Management Services. Optional 1.5% fee for external debit card transfers.

2Rates accurate as of 10/01/2024. The interest rates and annual percentage yields (APY) are variable and may change at any time at our discretion. No minimum deposit or minimum balance requirements. Fees could reduce earnings on the account.

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