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How to build an emergency fund, step by step

Build an emergency fund by adding up your essential monthly costs, choosing how many months of them to cover, and dividing that total by the months you will take to get there. With $2,400 of essentials, three months is $7,200, or $400 a month over 18 months.

By Swapnanil Dhol. Last updated

How to build an emergency fund

  1. Add up your essential monthly costs. Include rent or mortgage, utilities, groceries, transport, insurance and minimum debt payments.
  2. Choose how many months to cover. Many guides suggest three to six months. A smaller starter amount is still useful while you build.
  3. Multiply to get the target. Essential monthly costs times the months you chose is your goal.
  4. Set a deadline and divide. Divide the target by the months you will take to reach it.
  5. Keep it separate and automate. Hold it in an account you will not spend from, and schedule the monthly transfer.

How much should an emergency fund be?

There is no single right number. The US Consumer Financial Protection Bureau says the amount depends on your situation and that even a small amount helps, and it points to three to six months of expenses as a cushion to keep in mind. Start with your own essential costs.

Example: essential costs of $2,400 a month
Months coveredTargetSaved over 18 monthsSaved over 24 months
1 month$2,400$133.33 a month$100 a month
3 months$7,200$400 a month$300 a month
6 months$14,400$800 a month$600 a month

What counts as an essential cost?

  • Housing: rent or mortgage, plus utilities
  • Food and basic household supplies
  • Transport to work
  • Insurance and health costs
  • Minimum payments on debts

How do I build an emergency fund if money is tight?

Start smaller and move the deadline out. A $1,200 starter fund over 12 months is $100 a month. The CFPB suggests saving a one-time windfall such as a tax refund, and setting up recurring automatic transfers so saving happens without a decision each month.

Where should I keep an emergency fund?

The CFPB lists a bank or credit union account among the options, and notes that cash at home can be lost or stolen. Choose somewhere you can reach quickly but will not dip into by accident.

When should I use it?

Decide what counts as an emergency before you need the money. The CFPB recommends setting your own guidelines, because paying for an unplanned cost with credit can make it more expensive through interest and fees.

How do I track an emergency fund in Goaley?

Create a goal named Emergency fund with your target and deadline. Goaley: Savings Goal Tracker plans the contributions, shows the next amount and whether you are on track, and keeps a history of each deposit. It does not move money, so you still make the transfer. See how the plan works or try the savings goal calculator.

Give your emergency fund a deadline

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