It’s important to have an emergency fund because it could preserve your financial well-being in the event of an emergency, illness or job loss. An emergency fund could even mean the difference between having transportation or not, or even losing your home or keeping it.

Learn more about why you need an emergency fund and how much you should save up  in our other articles.

There’s three main ways that people save money and build an emergency fund:

  1. Save investment earnings - Use some or all of the earnings (but not the principal) from other investments (e.g., savings accounts, dividend-paying mutual funds or stocks)
  2. Reduce your discretionary spending (e.g., eating out, movies, spa days) and put that money towards your emergency fund
  3. Save aggressively — if available, use a payroll deduction at work; budget your savings as part of regular household expenses

Save Investment Earnings

Not everyone has other investments available and, even if you do, you may have those investments earmarked for something like a home down payment or retirement, so you may not want to funnel those earnings into your emergency fund. If you are thinking of about buying a home though, an emergency fund is essential – so consider setting up your emergency fund before you finish up saving for that down payment.

For most people, reducing discretionary spending and saving aggressively for a period of time are the best ways to find the money necessary for an emergency fund. Check out the 10 strategies below – at least one of them is bound to work for you.

Reduce Spending and/or Save Aggressively

  1. Make contributions towards your emergency fund part of your regular monthly budget – somewhere between $20 and $200 can fit into most monthly budgets. If you can save more, then save more. Make this contribution a priority and fit your other expenses around it.
  2. Open a round-up account. These accounts are offered by many institutions including Patelco – and your purchases are automatically rounded up to the nearest dollar, with the excess money put into a savings account. For example, if you use your debit card to fill up $25.60 worth of gas, the purchase is rounded up to $26 and $0.40 goes into your savings account. Our Patelco Plus Checking  account does this – and even gives you a bonus 10% match to help you save more money.
  3. Open a high-yield savings account, like our Money Market account. This will grow your emergency fund faster and help you reach the goal of having at least 3 months’ worth of expenses saved.
  4. Forgo eating out during the workweek, and buy frozen meals at the grocery store or prepare meals from scratch the weekend before. This is guaranteed to save you money over eating out every day at work. Take the money you’re saving and put it into your emergency fund.
  5. Get a temporary, part-time job, such as extra seasonal work around the holidays. Use all the money you earn from this job towards your emergency fund.
  6. Sell old, unwanted electronics and other items from your household. Many of us have an old smartphone laying around unused, or a bookshelf that we moved into our garage.
  7. Set up automatic transfers from your checking account into your emergency fund savings account. Patelco Online™ makes this easy – just log in and select the TRANSFERS widget. Set up a transfer to happen every week or every month.
  8. Look at your monthly expenses and pick one item you’re willing to live without until you have your emergency fund saved up. Put all the money that you would spend on that item towards your emergency fund. Maybe it’s your monthly consumption on to-go coffee. Maybe it’s a streaming video subscription. You don’t have to give it up forever – just until you’ve met your savings goal.
  9. The next time you want to buy something – whether it’s a TV for the living room or a new jacket for work – look for a used item instead of buying new. Websites devoted to pre-owned stuff have become very popular. And don’t forget about your local thrift store. Then figure out the difference between the used item and the new item – for instance, if you paid $40 for a secondhand jacket instead of $100 for a new one, put $60 into your emergency fund.
  10. Set up an additional account – preferably a savings account that doesn’t have a debit card attached to it – and then have a set amount deposited each month from your paycheck. Almost every company allows direct deposits to be split, so you could have funds to cover your regular expenses put into your checking account and the rest put into your emergency fund.