Skip Navigation
Edvisors Star Logo
Edvisors Logo
  • Compare Lenders
      • Compare Lenders
      • Best Private Student Loans in January 2023
      • Student Loan Comparison: Federal Loans vs Private Loans
      • Parent PLUS Loans vs Private Student Loans
      • How Does Interest on Student Loans Work?
      • Private Student Loan Cosigner: Everything you Need to Know
      • View All Articles >
      College ave student loans apply now

      This is an advertisement.

      • Compare Lenders
      • Best Student Loan Refinance Companies for January 2023
      • Federal Student Loan Repayment Plans
      • Student Loan Forgiveness: How to Get Student Loans Forgiven
      • Repayment Plans for Private Student Loans
      • Parent PLUS Loan Forgiveness
      • View All Articles >
      refinance student loans with college ave get started

      This is an advertisement.

    • Private Student Loans
    • Refinance Student Loans
  • Plan for College
      • Is College Education Worth the Cost?
      • Most and Least Lucrative College Academic Majors
      • College Comparisons
      • View All Articles >
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • Measuring Academic Fit: Reach, Match and Safety Schools
      • Need-Blind Admissions
      • How Long is a College Essay
      • When are College Applications Due
      • How to Write a Good College Essay
      • View All Articles >
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • Filing the FAFSA 2023-24: A Simple Guide for Students
      • FAFSA Deadlines for 2023-2024
      • FAFSA FAQ - Your FAFSA Questions Answered
      • View All Articles >
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • Most Popular Scholarships for College Students in 2023
      • Apply for Free Scholarships for College
      • College Scholarships for Kids
      • Most Prestigious Undergraduate Scholarships
      • Las mejores becas para estudiantes hispanos y latinos
      • View All Articles >
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • How to Pay for College
      • Tuition Payment Plans
      • Pros and Cons: Borrowing From My 401K to Pay for College
      • Paying College Tuition with a Credit Card
      • Best Ways to Pay for College Without Financial Aid
      • View All Articles >
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • Financial Aid Disbursement: When and How You Will Get It
      • Should I Pay Off My Student Loans Right Now
      • How to Minimize Student Loan Debt
      • View All Articles >
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

    • Benefits of College
    • College Admissions
    • FAFSA
    • Scholarships
    • Paying for College
    • Student LIFE Blog
  • Student Loans
      • Filing the FAFSA 2023-24: A Simple Guide for Students
      • FAFSA FAQ - Your FAFSA Questions Answered
      • FAFSA Deadlines for 2023-2024
      • FAFSA School Codes
      • FAFSA 2023-2024 Guide & Resources
      • View All Articles >
      College ave student loans apply now

      This is an advertisement.

      • Best Private Student Loans in January 2023
      • Student Loan Comparison: Federal Loans vs Private Loans
      • Parent PLUS Loans vs Private Student Loans
      • How Does Interest on Student Loans Work?
      • Private Student Loan Cosigner: Everything you Need to Know
      • View All Articles >
      College ave student loans apply now

      This is an advertisement.

      • Filing the FAFSA 2023-24: A Simple Guide for Students
      • FAFSA FAQ - Your FAFSA Questions Answered
      • The complete guide to federal undergraduate student loans
      • What are Federal Parent PLUS Loans and How to Apply?
      • Financial Aid for Graduate School
      • Compare Subsidized and Unsubsidized Student Loans
      • View All Articles >
      College ave student loans apply now

      This is an advertisement.

      • Best Student Loan Refinance Companies for January 2023
      • Federal Student Loan Repayment Plans
      • Student Loan Forgiveness: How to Get Student Loans Forgiven
      • Repayment Plans for Private Student Loans
      • Should You Refinance Federal Student Loans?
      • Parent PLUS Loan Forgiveness
      • View All Articles >
      • Sallie Mae Student Loan Review
      • College Ave Student Loan Review
      • SoFi Student Loan Review
      • Ascent Student Loan Review
      • View All Articles >
      College ave student loans apply now

      This is an advertisement.

    • FAFSA
    • Private Student Loans
    • Federal Student Loans
    • Repay Student Loans
    • Lender Reviews
  • Credit Cards
      • Petal® 2 Visa® Credit Card Review
      • SoFi Credit Card Review
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • Best Credit Cards for 2023
      • Best Cash Back Credit Cards
      • Best 0% Introductory APR Credit Cards
      • Best Secured Credit Cards for 2023
      • Best Balance Transfer Credit Cards
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • How to Build Credit?
      • What Age Can You Get a Credit Card?
      • What is a Secured Credit Card?
      • What is an Unsecured Credit Card?
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

    • Card Reviews
    • Best Credit Cards
    • Credit Card FAQs
  • Money Management
      • Best Budgeting Apps
      • Budgeting Tips
      • Budgeting for Beginners
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • Financial Goals
      • How to Save Money as a College Student
      • What is an Emergency Fund
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • How to Pay Off Debt
      • Debt Relief
      • What is a Debt Management Plan
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • How to Check Your Credit Score
      • Best Credit Building Apps
      • What is Credit?
      Self Credit Builder: Build Credit. Build Savings. Build Dreams.

      Sponsored Ad

      • Investing for Beginners
      • Best Investment Apps
      • Understanding the Stock Market
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

      • What is Risk Management
      • How to Prevent Identity Theft
      • What is Insurance
      Win Scholarships - Join ScholarshipPoints.com

      This is an advertisement.

    • Budgeting
    • Saving
    • Debt Management
    • Credit
    • Investing
    • Risk Management
Search Box Form
School Search Form
Advertisement Disclosure
Advertisement Disclosure
×

Edvisors (“Edvisors Network, Inc.”) provides independent advertising-supported platforms for consumers to search compare and apply for private student loans. Loan offers from participating lenders that appear on our websites are not affiliated with any college and/or universities, and there are no colleges and/or universities which endorse Edvisors’ products or services. Lender search results do not constitute an official college preferred lender list. Edvisors receives compensation from lenders that appear on this site. This compensation may impact the placement of where lenders appear on this site, for example, the order in which the lenders appear when included in a list. Not all lenders participate in our sites and lenders that do participate may not offer loans to every school.

Edvisors is not a lender and makes no representations or warranties about your eligibility for a particular loan or financial aid. Lenders are solely responsible for any and all credit decisions, loan approval and rates, terms and other costs of the loan offered and may vary based upon the lender you select. Please check with your school or lender directly for information related to your personal eligibility.

Edvisors has endeavored to provide accurate information. However, the results provided by lenders are for illustrative purposes only and accuracy is not guaranteed, as such, Edvisors assumes no responsibility for errors or omission in the information provided.

×
Get Your Free Guide to Filing the FAFSA Today!

Thank you for your interest in Edvisors' 2020-2021 Guide to Filing the FAFSA.

Please complete the form below to access your free copy.

Thank you! Click here to download your free FAFSA Guide.

I am a:

×
College knowledge starts here!

Enter your email below to receive your Student Loan Handbook from Edvisors.

Please check your email for the Student Loan Handbook.

After Navigation
Home Money Management Saving What is an Emergency Fund
  • Contents
  • Why Do You Need an Emergency Fund?
  • How Much Do You Need in Your Emergency Fund?
  • How To Build an Emergency Fund

What is an Emergency Fund

Penny Redlin
By Penny Redlin
October 5, 2022
Email This Article
Fill out the form below to send a copy of this article to your email.
By clicking "Submit" I have read and agree to the Edvisors' Terms of Use and Privacy Policy. We strongly encourage you to read our Privacy Policy to understand how we use and share your information.
A copy of this article has been sent to your email.

An emergency fund is a source of funding on which you can rely when life throws you lemons. It is a cash reserve that you allocate strictly for when unexpected, costly and urgent issues arise. Such issues do not include dire wants, such as a new television or a pair of shoes but rather, true emergencies, such as the following:

  • Unexpected car repairs
  • Unexpected home repairs
  • Job loss
  • Personal injury
  • Unanticipated medical care
  • Sudden death of a loved one

In these situations, you may find yourself in dire need of a large amount of cash to quickly cover unexpected expenses. This is where your safety net comes in handy.
Since the unexpected can happen in the blink of an eye, and can potentially turn your whole world upside down, your ability to react appropriately and to move forward in the most efficient manner possible depend largely on your financial security at the time of the triggering event. While you do not necessarily need to have wealth to respond to emergencies appropriately, you do need to have an emergency fund.

Why Do You Need an Emergency Fund?

Without a dedicated savings account, even a minor emergency can set you back substantially. Too many people rely on credit cards, personal loans and other forms of financing to see them through tough times. While there is a time and a place for loans, borrowing money to cover small but unexpected expenses can quickly add up to a mountain of debt.

Before you know it, you may have a $500 credit card balance here, an $800 loan balance there and a $300 balance with a family member. Not only must you now pay down $1,600 to cover what could have been minor expenses but also, you must pay interest. Interest makes it difficult for already financially-strapped individuals to keep up, as interest payments can make up a weighty amount of the minimum monthly payment on many accounts. If you already live on a tight budget, financing emergencies can eventually force you to pull money from other sources of savings, such as your high-yield savings account or certificates of deposit. Not only does this cause more stress in your life but also, it compromises your long-term savings goals.

When you have a dedicated emergency bank account, however, you can cover unexpected expenses with cash. This prevents you from racking up costly debt and keeps your money worries at bay.

How Much Do You Need in Your Emergency Fund?

A good rule of thumb when building your emergency fund is to start with a small amount. If you can afford to put just $500 in to start, you should have enough to cover a minor vehicle repair, a few missed days at work or an unexpected medical expense. If you put this amount in a high-yield savings account or an interest-bearing checking account, that $500 can grow slowly with time.

Say you cannot afford to put even $500 toward the fund, though. The good news is that, for most people, emergencies are few and far between. If you set aside just a small amount of your paycheck each month — such as $50 to $100 — you can grow a safety net of between $600 to $1,200 within one year. Again, if you use an interest-bearing account, that amount will grow with time.

Ideally, though, you want to end up with an amount that can cover between three to six months’ worth of living expenses. This will help you cover the costs of living during periods of job loss, personal injury or other financially debilitating events.

How To Build an Emergency Fund

The best and only way to build an emergency fund is to start saving. Whether you open a separate checking account that you plan to use strictly for emergency purposes or need an account with less accessibility, establish a separate source in which to keep your funds. Once you do that, do the following.

Set Feasible Savings Goals

Sure, it would be nice if you could contribute $500 to your emergency fund each month. Then again, if you could do that, you could cover the cost of an emergency out of pocket. Assuming you, like many other Americans, live on a tight budget, start with small, manageable goals. For instance, instead of saying you want to save $500 in the first month, plan to set that much aside by month four. This would mean setting aside $125 per month, which is doable for many people. Once you accomplish your first goal, up the ante by striving to save another $600 within the next four months.

Automate Transfers

It’s hard to miss money you never had, which is why you should automate your savings goals in some way. For instance, have your employer deposit a portion of your paycheck into a separate account on your behalf. If he or she cannot do this, set up reoccurring transfers between your checking account and savings account.

Save Leftover Cash

If you ever have money left in your go-to checking account at the end of a month, transfer it to your savings. You didn’t need it last month and chances are you will not need it in the next one. While you may be tempted to splurge simply because you can, putting that money aside will prove far more rewarding in the future.

Keep the Change

More checking accounts today offer the ability to automatically transfer the difference between the change of a transaction and the next whole dollar to a linked savings account. What this means is that every time you swipe, you save a little more. If your bank doesn’t offer this capability, there are dozens of free money-saving apps that do.

Invest Your Tax Return

Your tax return offers an easy way to bolster your emergency fund by hundreds to thousands of dollars in one fell swoop. Instead of using your tax return to fund your spring break vacay or to purchase that high-tech espresso machine, put it towards your future. Doing so may not be instantly rewarding, but it will pay off when you can pay for unexpected expenses out-of-pocket.

Be Kind To Yourself

All work and no play makes Jack a dull boy — and may discourage your motivation to save. Once you hit your various goals, celebrate. Take yourself out for a cup of coffee, buy that cheeseboard or say yes to that (affordably priced) dress. Small rewards for your efforts can give you the motivation to keep going.

While it’s crucial to save for a rainy day, it’s understandable that sometimes you just can’t. When emergencies crop up last minute, or when they cost more than what you have stored away, investigate credit products and services that have favorable terms and conditions.

 

Get this article in your inbox.
Email This Article

Related Content

How to Save Money as a College Student
By Ainsley Rindfleisch
11/14/2022
This may be your first time managing your own money; you may not be aware of the different strategies and tools available to help you make your money go further and even save some along the way!
Read More
How to Budget: Budgeting Tips for College Students
By Ainsley Rindfleisch
11/04/2022
Budgeting allows you to see and track your outgoing expenses from incoming expenses. A budget helps you to manage and master the money you have by allocating it to specific categories.
Read More
Types of Savings Accounts
By Penny Redlin
10/26/2022

If you decide you need a savings account. Here are some of the different types you can choose from: traditional savings accounts, high yield savings accounts, certificate of deposit, money market account and cash management accounts.  

Read More
How to Save Money as a College Student
By Ainsley Rindfleisch
11/14/2022
This may be your first time managing your own money; you may not be aware of the different strategies and tools available to help you make your money go further and even save some along the way!
Read More
How to Budget: Budgeting Tips for College Students
By Ainsley Rindfleisch
11/04/2022
Budgeting allows you to see and track your outgoing expenses from incoming expenses. A budget helps you to manage and master the money you have by allocating it to specific categories.
Read More
Types of Savings Accounts
By Penny Redlin
10/26/2022

If you decide you need a savings account. Here are some of the different types you can choose from: traditional savings accounts, high yield savings accounts, certificate of deposit, money market account and cash management accounts.  

Read More
Could You Be Saving More?
Subscribe to Edvisors' Student LIFE Newsletter to receive up-to-date financial aid information and advice, explore scholarship opportunities, loan repayment options, and learn expert strategies on how to plan and pay for college.
Newsletter Form
By clicking "Subscribe" I have read and agree to the Edvisors' Terms of Use and Privacy Policy. We strongly encourage you to read our Privacy Policy to understand how we use and share your information.
Thank you for subscribing to our newsletter.
We care about your privacy

This website uses cookies to offer you the most relevant marketing and targeted advertisements.  These cookies can collect information to personalize your experience and in some states are considered a sale of your personal information. You may exercise your right to opt out by clicking on deny cookies.  If you opt out, we or our partners will not be able to provide you with personalized ads and we will not provide your personal information to any third parties.   Please accept cookies for the optimal experience.  You can withdraw or modify your consent for non-essential cookies at any time by visiting Cookie Preference page.

Ask the Edvisor
Blog
Contact Us
Edvisors in the News
Link to Us
Newsletter
Partners
Press
Student Aid FAQ
Testimonials
Tools and Calculators
About Edvisors
Video Resources
Financial Terms Glossary
Accessibility Statement
Sitemap
Disclaimer
Notice of Collection
Interest-Based Ads
Cookie Settings
Privacy
Terms of Use
Your Opt-out Rights
Your Privacy Choices Privacy Options

Better Business Bureau logo

Edvisors provides expert advice on planning and paying for college. On Edvisors.com easily compare student loan lenders, learn how to apply for financial aid, and discover scholarships. Learn about federal and private student loans for students and parents, how and when to apply to college, and more!

Edvisors (“Edvisors Network, Inc.”) provides independent advertising-supported platforms for consumers to search compare and apply for private student loans. Loan offers from participating lenders that appear on our websites are not affiliated with any college and/or universities, and there are no colleges and/or universities which endorse Edvisors’ products or services. Lender search results do not constitute an official college preferred lender list. Edvisors receives compensation from lenders that appear on this site. This compensation may impact the placement of where lenders appear on this site, for example, the order in which the lenders appear when included in a list. Not all lenders participate in our sites and lenders that do participate may not offer loans to every school.

Edvisors is not a lender and makes no representations or warranties about your eligibility for a particular loan or financial aid. Lenders are solely responsible for any and all credit decisions, loan approval and rates, terms and other costs of the loan offered and may vary based upon the lender you select. Please check with your school or lender directly for information related to your personal eligibility.

Edvisors has endeavored to provide accurate information. However, the results provided by lenders are for illustrative purposes only and accuracy is not guaranteed, as such, Edvisors assumes no responsibility for errors or omission in the information provided.

Copyright © 1998-2023 by Edvisors Network, Inc. All rights reserved.

All other trademarks and service marks displayed on Edvisors Network, Inc. websites are the property of their respective owners.

Edvisors Network, Inc. 350 S. Rampart Blvd, Suite 200, Las Vegas, NV 89145

Copyright © 2023 by Edvisors.com. All rights reserved.

×
You Got In - Now How Do You Pay for It?

Get the money you need from leading lenders

1 Pick Your College
2 View Your Options
3 Click to Apply
Exit Modal

PrivateStudentLoans.com recommends you consider all financial aid alternatives including grants, scholarships and federal loans (Federal Stafford, Federal Parent PLUS, Federal Grad PLUS) prior to applying for private student loans.