How to Create An Emergency Fund – Even When Your Broke

Saving Up an Emergency Fund

Saving up an emergency fund, which can also be called a rainy day fund, provides you with some extra financial footing to handle the little issues life can throw at you. You can utilize this money if your family experiences something unexpected, such as a car breaking down or needing to replace an appliance suddenly – things happen!

It's important to set aside a bit of an emergency fund so that you and your family are protected in case something goes wrong.

  • What is an Emergency Fund?
  • Make Your Savings Automatic
  • Round Up Your Savings
  • Ways to Save Money Regularly


What is an Emergency Fund?

This type of fund is, put simply, a specific amount of money that you set aside to help you cover expenses that are both unexpected and urgent. Having this type of buffer can mean that you won't need to borrow money from a bank, a friend, or a family member if an emergency happens and you need money suddenly. This can provide you with a large amount of peace of mind.

One important part of building up an emergency fund is to start out small and work towards saving on a regular basis. It doesn't really matter how much or how little you set aside, as long as you get started and then continue regularly.

If you save only $10 a week, for example, you could have $520 set aside by the end of the year. This is a small, but still, a solid amount of money that can help you out in an emergency.

Make Your Savings Automatic

Taking the time to save on a regular basis is the best way to make sure you build up your emergency fund. Set up a savings account for your emergency fund, and then automate payments to go into it on a regular basis from your bank. You may also be able to get your company's payroll department to deposit part of your pay into a savings account.

This way, you can set up the system and forget about it, knowing that you don't have to make a transfer on a regular basis.

If you're able to find a savings account the provides you with a bonus for each month that you don't make a withdrawal, you'll be less likely to touch the money, as well, so be sure to look for bonuses.


Round Up Your Savings

Banks now offer an option to round up the purchases you make, then transfer this amount to your savings account. You can opt to round this amount up to the nearest $1-$5

Then your account will be debited a round number and the additional change will be transferred to your savings account.

If your home loan has an offset account, you can also use this as an emergency fund. This allows your money to work to lower your interest on your loan, but also allows you to utilize it if you need to in an emergency.

Ways to Save Money Regularly

Track Your Expenses: It can be easy to lose track of the money that you spend on a daily basis. By tracking the money that you're spending regularly, you can keep an eye on areas where you can save a bit more.

Limit Impulse Purchases: Every time you make an impulse buy, you're using money that you could be putting in savings.

Save Your Change: A coin bank doesn't have to be just for children. Get a jar or large plastic container and start saving your spare change throughout the week. Once it's full, take it to the bank and add it to your savings account.

Make a Budget: Budgets can help you get a clearer idea of what your financial picture looks like so that you can find and plug up any spending leaks that exist.

Continue to Add to Your Savings Account: If you receive any financial windfalls through the year, such as a bonus or a tax refund, you may want to consider adding this income to your emergency fund.

Experiencing a large, unexpected financial emergency isn't a great feeling, but knowing that you have money in savings to handle it may help keep you from stressing too much. You don't have to worry about where the money will come from, and you can focus on getting the issue handled safely, instead.

Smart Tip: If you find that you need to pull money from the emergency fund, remember to put money back as soon as you're able.


Example: Maddie puts her emergency fund to use.

Maddie had been working on transferring money into an emergency fund for over two years and had gradually saved almost $1,500. She had this set up on automatic transfers from her bank account on payday, directly into her high-interest savings account.

One day, her car broke down while she was out doing errands, and she was able to use some of the money in her emergency fund to pay for the repairs.

Maddie was pleased to find out that she wouldn't have to borrow money or put the repairs to her vehicle on a credit card. Now she's back on the road, and her emergency fund will continue to grow for any future issues that might arise.


Keep the money set aside for absolute emergencies. If you need savings for other issues, then set up different savings accounts for them, with their own savings goals.

Your emergency fund will help you manage your finances even when an emergency arises.

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