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How to Create an Emergency Fund

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Special thanks to TD Bank for sponsoring today’s post. I’m grateful to the Mom It Forward Blogger Network for connecting me with brands that benefit my family and my readers’ families.

You’ve probably heard that you SHOULD have an emergency fund, but do you ever wonder how to create an emergency fund? When your paycheck is barely covering all of your bills, it can be hard to fathom socking away enough savings to cover six months of those expenses.

Emergency Fund

Feeling defeated before you’ve even started, you decide you’ll start that emergency fund later. You convince yourself that after that next raise, or next big windfall (e.g. a large income tax return), you’ll kick start that emergency fund.


It’s a good plan. The only problem is that by their very nature, emergencies pop up unexpectedly. If that happens to be BEFORE you get around to starting your fund, you’ll have to rely on loans or credit cards to see you through. Next thing you know, that future income you earmarked to start your emergency fund goes to paying off debt instead. And, it’s likely insufficient since on top of the debt, you now have interest to contend with too.

I’ve fallen into this trap and I want to make sure you avoid it. It’s easier than you think! Here are my simple strategies for creating an emergency fund.

a blue piggy bank with a five dollar bill sticking out of it with a sticky note on it reading emergency fund next to coins on a brown table

Aim Low

Traditional financial advice recommends that your emergency fund contain a minimum of three months’ worth of expenses. Ideally, you’d have enough to cover six months.

Forget that advice. Yes, it’s IDEAL. But when you’re just starting out, it’s also intimidating. So, set a more realistic goal.

I recommend $300. Why? Because if you put away $50/month, you can reach that goal in six months. Almost anyone can find $50 a month if they try (check out my money saving tips if you want some ideas on how to find it). And six months is a short enough timeline that you can stay motivated and focused on your goal.

Once you’ve met your initial goal. Challenge yourself to increase your weekly or monthly savings so you can more than double your emergency fund in the next six months.

Choose the Right Savings Account

You have lots of different savings account options. For an emergency fund, you want to make it difficult to tap into too easily. But you also want to be able to easily access it in case of an emergency. I recommend starting with a standard savings account, moving to a money market account as your balance grows, and eventually planting your fully funded emergency fund (six months of expenses) in a high-yield account.

I’ll use TD Bank as an example since they have so many great, competitive options:

  • Simple Savings – no minimum deposit, low monthly maintenance fee (which can be waived), 0.05% APY
  • Money Market Account – no minimum deposit, but $2,000 minimum deposit required to waive monthly maintenance fees, tiered interest (the more you save, the more you earn!), maximum of six withdrawals per month
  • Select Savings – no minimum deposit, but $15,000 minimum deposit required to waive monthly maintenance fees, higher interest rates

So, you’d start your savings in Simple Savings. If you set up an automatic withdrawal from TD Checking to your savings account (which is my NEXT recommendation), you’ll avoid having to pay a monthly maintenance fee. That’s right, extra incentive to fund that emergency fund!

After you’ve built up enough to cover a month or two of expenses, open a money market account so your savings can start to go to work for you. The higher interest rates you’ll earn for higher balances, will motivate you to keep contributing. Plus, with a limit on the number of withdrawals per month, you won’t tap into it unnecessarily.

Finally, when you’ve managed to fully fund a six-month emergency fund, consider a high balance account. You’ll earn a ton more in interest and you’ll be less likely to pull out money unless it’s a TRUE emergency since it will mean you have to start paying a monthly maintenance fee. Even in the event of an emergency that pulls you beneath the minimum balance, the maintenance fee will probably still be well below any interest payments you would have had to make on a loan or credit card payment.

Set Up Automatic Savings

I STRONGLY recommend that you set up an automatic withdrawal from your paycheck or checking account directly to your savings account. It eliminates the need for you to make a decision to save each time. Instead, you’ll have to make an effort to delay or cancel the transfer if you think you need the money. Sometimes that minor barrier is all it takes to make you re-evaluate your spending so that you can meet your savings goals.

Even though our emergency fund is finally fully funded, I still have $100 per month automatically sent to a money market account. When a “minor” emergency pops up, I tap into that account instead of our high-yield emergency fund. I’m always surprised by how much money is sitting in that account when I have to pull money from it. Once you “set it and forget it,” the amount will grow faster than you realize.

It Works

This is the exact system I used to build our emergency fund. I promise you, it works!

Start with small goals, pay yourself first, and use accounts that grow your money the fastest. Deceptively simple!

11 thoughts on “How to Create an Emergency Fund”

  1. This is so important and I wish we had had a fund in our early years of marriage! Luckily we have learned from our mistakes and have one now! Great tips.

  2. I’m a big proponent of saving – because it always feels good to know you’ve taken every legit possibility into account before deciding how and where to spend your money! Great advice for those planning for the future.

  3. Having an emergency fund is so important and this makes it so attainable! Even if you have low income, you can still set aside something each month! Great tips!

  4. Great post and a great reminder why we should all have an emergency fund! I remember starting low and it did help.

  5. Thank you for these tips! They’re so helpful. It didn’t occur to me before to set it up as automatic payments. I’m going to do that.

  6. Such great advice. Even starting slow, means you will have something when the emergency pops up. And definitely make it hard to get at. It will make you think twice if it’s really an emergency or you just really want something.

  7. Saving can really be overwhelming, so I think you’re smart to recommend a smaller number. Almost anyone can do $300… totally attainable!

  8. I think $300 is a great starting point. When I think of the little “emergencies” that pop up – they’re usually $500 or less.

  9. This is such a doable method! I think many of us put off creating an emergency fund because it seems like an intimidating and lengthy process. In reality, it’s not and can be such a huge help financially!

  10. I agree with you about setting up automatic deductions that way the money is “gone” before you even think about it. I have to confess, I’m not sure about aiming low.I usually follow the aim high philosophy. But I can agree with you if it establishes the savings habit that will contine. And saving any amount is better than none.


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