Creative Ways to Build an Emergency Fund
Brought to you by PNC Bank

Do you have money put aside for a rainy day? Get some creative ideas to help make building your emergency fund a little easier.

How much money should the average person have in an emergency fund?
Which of the following qualifies as an emergency fund expense?
The only way that you should save for an emergency fund is to treat it like a regular expense.
You should save at least $100 a month for your emergency fund.
It’s a good idea to have a separate account for your emergency fund.

Right!

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Jump Start Your Emergency Fund

For the next month, throw every $5 bill that lands in your hand, pocket, purse or wallet into a jar. How much do you think you’ll save? At the end of the month, take the money to the bank to open a savings account. Viola! Your emergency fund is born. Do it again the following month, or just set up a monthly transfer to your emergency fund, and watch your savings grow.

Want to know how much you should be shooting for? Use our Emergency Fund Calculator.

USE THE CALCULATOR

Session Q & A

  • Six months is a good rule of thumb. However, there are some circumstances where you may want to put away more. If you are the only earner in your family or have a job that may take a while to replace, consider saving up to a year of expenses. But if these don’t apply, it might be better for you to pay off debt or contribute to other savings goals, like saving for retirement or a college fund. It all depends on your personal situation.

  • It is a good idea to keep at least a few months of living expenses in a very liquid account, like a traditional savings account, so you can get to it in the event of an emergency. If you do decide to invest part of your fund, make sure it’s in a conservative, short-term investment, such as a short-term CD or a short-term bond fund, and be aware of any penalties you may face if you need to withdraw funds early.

  • Having a separate emergency fund is a good idea for many reasons. First, you’ll know exactly how much you have and how much you still need to save. Second, you’ll be less likely to dip into the funds if you need a little extra for things like a vacation or new furniture. Third, an emergency fund is something that you build, and then leave alone. It’s a lot easier to forget it if it’s in a separate account.

  • Saving for retirement and managing debt are both important financial goals that you should try to include in your regular budget. Then you can figure out how much you can realistically put toward your emergency fund each month. You may have to find expenses to cut back on in order to accomplish all three goals at once, but it is possible. Remember that saving even a small amount toward your emergency fund each month can be beneficial.

  • Review your monthly expenses and add up the things you absolutely have to pay for each month. Your mortgage, minimum payments on credit cards, monthly bills like car payments and basic utilities. Other expenses people often forget are tuition, taxes and insurance payments. You’ll also need to account for groceries, gas and other variable expenses. If you were in a bind, you could cancel extras like cable or a gym membership, so you can choose whether or not you want to include these in your figure. Once you’ve got your monthly amount, multiply it by six. That’s the number you’re shooting for.

David Ning

David Ning is the founder of MoneyNing, a personal finance site with more than 500,000 unique visitors per month. He also posts regularly for MoneyNing on Twitter and Facebook. His other online properties include Investing School and Personal Finance Buzz—a bookmarking site that features the best in personal finance and money articles. Before becoming an entrepreneur, David had a successful career in information technology and sales. David is the father of two young children, and lives in Irvine, California, with his family.

David Ning is the founder of MoneyNing, a personal finance site with more than 500,000 unique visitors per month. He also posts regularly for MoneyNing on Twitter and Facebook. His other online properties include Investing School and Personal Finance Buzz—a bookmarking site that features the best in personal finance and money articles. Before becoming an entrepreneur, David had a successful career in information technology and sales. David is the father of two young children, and lives in Irvine, California, with his family.

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