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We’ve all heard some variation of the fact that most Americans are one large expense away from going into debt.
The reasons people don’t have an emergency fund can vary. For some, the number feels too big and other things feel more important.
For high earners with steady paychecks and investment accounts, an emergency fund can feel insignificant. After all, I could just pull the money from somewhere if I really needed it, right?
The bottom line is this- having money designated and accessible for emergencies will prevent you from going into debt, borrowing money from another account, or doing some other kind of financial kung fu you might regret down the road.
This post breaks down a 12-month plan anyone can follow to create an emergency fund, at any income level.
If you’ve been putting off building an emergency fund because you don’t know where to start, this is the post for you.
I’m currently building my own emergency fund- my target is $15,000 and I’m sharing exactly how I’m getting there.
Why an Emergency Fund is Non-Negotiable
An emergency fund has become non-negotiable for me. Without money set aside for unexpected expenses, an emergency becomes debt (or sabotages another goal if you pull the money from somewhere else).
As a single mom and the financial safety net for my two teens, the thought of not having a plan in the event of an emergency terrified me.
At the beginning of 2025, my emergency fund had $1,300 in it. While this is better than nothing, I really sat with the following questions and determined it was not enough.
- What would I do in the event of an emergency? How would I cover an unexpected expense? How would I pay for it and where would the money come from?
- How would I handle losing my job? How long would I be able to support our family?
My answer to that last question was not even one month. That reality sinking in gave me a lot of anxiety. I really was one large bill away from a crisis.
On top of that, I could see how not having an emergency fund had led to maintaining/increasing my credit card debt.
I knew I had to change something. I wanted to have a clear plan in the event of an unexpected expense.
How Much Do You Actually Need
The standard recommendation is to have 3-6 months of essential expenses set aside for emergencies. Depending on who you talk or listen to, this recommendation may vary.
For example, some people have a primary residence and a rental property. They may choose to keep additional funds set aside for unexpected home repairs, property maintenance, etc.
For the sake of simplicity, we are going to assume the standard advice of 3-6 months is a good starting point for you.
You might be wondering how to calculate your target emergency fund. Here are the steps to calculate the number for your specific situation:
- Add up your essential monthly expenses
- Include things you must pay like rent, utilities, minimum debt payments, groceries, etc.
- Leave out unnecessary expenses from this equation- example: monthly budget to visit ice cream shop (hey, this could be important to someone)
- The assumption is that in the event of an emergency, unnecessary expenses would be temporarily paused until finances are stable again
- Multiply the total by 3 for a starter fund or by 6 for a full security fund. There’s your number!
For most people, around $10,000 will be a reasonable target. This number may vary depending on your unique circumstances.
My fixed expenses are around $5,000 per month right now. This is due to renting in a higher cost of living area (where my kids go to public schools) and due to minimum debt payments.
One thing that has helped me build up my emergency fund, even while paying off debt, is to remember that I don’t need to magically make it appear at once.
The 12-Month Plan
Once you have determined your target, the next step is to map out how you will fund it.
Breaking your goal down into steps will make it feel more achievable. Let’s be honest, setting aside money will require that you do something different.
Behavior change can take time and may vary over time. The steps below outline setting aside a $10k month emergency fund but can be applied to any amount of money.
Months 1–3: Build Your Base ($0 → $1,000)
The first thing you will do is open a dedicated high-yield savings account (HYSA) to keep your emergency fund separate from your checking account.
The next step is to automate a small transfer of money every payday. Even $50 a paycheck adds up. When I first started building my emergency fund, this is the amount I contributed.
While it was small, it signaled “progress” to my brain and slowly became a habit.
The first milestone of establishing an emergency fund is getting to $1,000 as fast as possible.
Quick wins make a real difference here- canceling a subscription and redirecting the funds, selling something on Facebook marketplace, etc.
Get creative!
Months 4–6: Build Momentum ($1,000 → $4,000)
Once you have $1,000 set aside, it’s time to step up your effort.
If you can increase your automatic transfer, this is a good time to do so.
I have my automatic transfer set up with my employer direct deposit- $300 automatically deposits into my emergency fund each paycheck.
Not having to manually make this transfer has been key for me. The money comes out of my pay before I even see it.
Another way to ramp up your contributions is to put any “windfalls” of money to your emergency fund. For example- a tax return, bonus, etc.
Pro tip- use a percentage of any windfall on something just for you. Enjoying money while pursuing financial stability has helped train my brain that stability can be safe and fun.
Don’t forget to celebrate milestones on the way to your goal- $2,000, $3,000 funded.
Months 7–9: Push Through the Middle ($4,000 → $7,000)
The middle of any goal is where most people stall. The urgency from month one has faded.
If you’ve developed a habit of saving, it might feel kind of boring. This is good!
Keep the automation running even when it feels slow.
Now is a good time to revisit your target number- has anything changed in your expenses that would change your goal?
One thing to remember is this- once you reach your target goal, you can redirect the money you are saving to something else.
Months 10–12: Cross the Finish Line ($7,000 → $10,000)
The process gets easier towards the end. You’re close enough to see the finish line! Use this momentum as fuel.
Consider a one-month push to close out strong. This could include no eating out, taking on a freelance project, or doing a no spend challenge.
Last but not least, make sure you celebrate hitting your goal once you hit it. This is a big deal!
Where to Keep It
The best place to keep money you do not plan to use but may need to access quickly is in a high-yield savings account (HYSA).
This money should not be in your checking account where you might be tempted to spend it or part of your long-term investments.
I have had success with keeping my HYSA at a completely separate bank. I personally use Ally bank where I earn 3.0% interest and would recommend it to anyone!
I love that Ally allows you to create “buckets” within a savings account. My emergency fund is one bucket but I have others, which allows me to keep all of my savings in one account.
Read more about the simple way I have my financial accounts set up.
Some things to look for in a HYSA include: being FDIC insured, accounts with no monthly minimum fees, options to easily transfer to other bank accounts.
What to Do When You Have to Use It
An emergency fund is meant to be used- that’s the whole point and why you need to have access to it.
When you dip into your emergency fund, your only job is to refill it.
Using the money for what it’s intended for is not a failure, it’s the system working perfectly.
Once you have stabilized your finances, restart your automatic transfers immediately.
I admittedly do not have the best track record with using an emergency fund as intended.
For the entirety of my 11-year marriage, I did not have an emergency fund but rather relied on my ex-husband’s business income. That somehow worked for us but it was by no means an organized plan that I will be repeating.
I had a sizable emergency fund established post divorce, leading into 2022. Unfortunately, $30k in unplanned legal fees, combined with lifestyle creep drained this fund.
At the time, I didn’t realize the significance of the fund being drained while I was making lifestyle changes. Looking back, I would have made some different decisions but I can say that I learned from the decisions I did make.
Fast forward 3 years- I can see how important it is to prioritize having an emergency fund available. It offers peace of mind, continuity, and options during instability.
Conclusion
I hope this post has helped you see that saving $10,000 in 12 months is achievable on any salary if you automate the savings and stop waiting for the “right time”.
I encourage you to open a HYSA today- not next week, today.
Breaking the paycheck to paycheck cycle starts here- learning how to build an emergency fund is one of the most important financial moves you can make.
Want to see exactly how I set up my accounts to make this automatic? Grab the free 3-account setup guide below.