9 Ways to Build an Emergency Fund When Money’s Tight


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Are you among the many Americans who have no money set aside for a real emergency like a job loss or an unexpected major bill? Here are steps to fix that and help you sleep better at night.

Would you believe that 66 percent of American families have less than five months’ worth of income saved for an emergency? And a whopping 28 percent have no emergency savings at all, according to a 2012 survey by Bankrate.com.

If there’s one thing the recent financial crisis has taught us, it’s that nothing is guaranteed. Our jobs, increasingly tied to the global economy, aren’t a sure bet. Even industries that could typically weather hiccups on Wall Street can’t always stay in the black in our world’s new intertwined economic realities. For employees and their families, that means having a healthy emergency fund isn’t just a good idea — it’s an absolute must.

If you’ve been considering starting an emergency fund, but are daunted by the prospect of stretching those dollars even further, this article is for you. Here are a few creative ways to build an emergency fund on a shoestring budget:

Set a goal

Setting clear and realistic goals is the first step to achieving great things. Know your emergency fund target amount by calculating your total net take-home pay for eight months. Visualize reaching your goal and track your progress along the way. Start slow, stay steady, and watch your stash of cash grow bit by bit. Avoid the temptation to dip into your fund for any reason except legitimate emergencies. You’ll be surprised how having this little self-made insurance policy gives you extra peace of mind.

Put the word out

Letting friends and family know that you’re working toward some general financial goals helps develop a community of support. You don’t have to divulge your deepest financial secrets; just communicate that you might be skipping a few lunches out, lightening your holiday budget, or brewing your own morning coffee in order to save more deliberately. Success is contagious, so don’t be afraid to share how well things are going and inspire others.

Spare some change

Though it may sound like a painfully slow and quaint strategy by today’s standards, our parents and grandparents knew the power of saving a dime at a time. Start a new habit of paying for everyday purchases exclusively with cash. Funnel all the spare change into a Mason jar and let your savings grow the old-fashioned way.

Start part time

If you have skills that can be marketed in a freelance capacity, consider launching a part-time business to partially fund your emergency account. Otherwise, an evening or weekend job can give you a quick leg up on savings too. But don’t lose sight of the goal: Pocket what you make and keep your lifestyle low-key.

Sell the excess

Take a moment to look around you. Are you sitting in a home or office filled with excess stuff? Start sticking mental price tags on all of those old clothes, unused electronics, old video games and idle bicycles. Sell on eBay, post on Craigslist, host a yard sale, or work with a local consignment shop to turn that clutter into cash. Devote your windfall to your emergency fund.

Rethink your 401(k)

Temporarily reduce your 401(k) contributions to the lowest amount that will still allow you to take advantage of company matching funds. Direct the extra cash to your emergency fund and remember: Roth IRAs are great savings vehicles for this purpose. Just be sure to keep the emergency portion of your Roth invested in a money market or cash-equivalent account for easy and immediate access.

Save the raise

Believe it or not, companies still do give raises from time to time. If you’re lucky enough to receive a cost-of-living pay increase or a one-time bonus for a job well done, consider adding the extra cash to your emergency fund.

Fund with your refund

Those yearly tax refunds feel great, but having too much withheld from your paycheck means you’re essentially providing the government with an interest-free loan throughout the year. Because this isn’t the best financial strategy, at least make sure you make the most of that refund when you get it. Instead of planning a weekend shopping spree, put that money to work for you by socking it away in an interest-bearing account for emergency use.

Double-time that overtime

If your job has opportunities for overtime, consider using it strategically to help build your emergency fund. Keep track of your OT hours and transfer that amount into a savings or money market account each pay period. When you hit your goal, phase out the overtime, or set your sights on that next financial target.

Granted, building an emergency fund from scratch takes a bit of perseverance and discipline, but it doesn’t have to be all drudgery. As with any focused project, you’ll be surprised how energizing small successes can be. The key is being creative in your methods, communicating your intentions, and staying consistent over time. Before you know it, you’ll have an emergency fund that will not only help you in a financial pinch, it’ll help you sleep at night. And who can put a price on that?

Stacy Johnson

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