How to Create An Emergency Fund


An emergency fund is vital in order to have a healthy financial foundation and it;s important that you and your family know how to create an emergency fund.. Without it, it’s kind of like you’re standing there saying “life give me your best shot.” No one wants to live at the mercy of life’s many unfair woes. I’m pretty sure you really don’t have time for that.

No one wants to live at the mercy of life’s many unfair woes. I’m pretty sure you really don’t have time for that.

Wouldn’t it be great to have a cushion ready when life decides to knock you on your butt? I mean you may fall but at least, it’s not going to hurt.

That’s the great thing about an emergency fund. When life’s unexpectantcies happen there it is to save the day and your emotions.

Let’s go through a few general questions regarding the emergency fund.

What is an emergency fund?

An emergency fund is a reserve of six months of expenses that you have set aside in case of a life altering event such as the loss of a job, illness, or major repair.

But if you really want to be AMAZING I would personally strive for twelve months of expenses. I say this because usually after a major event occurs it takes time to adjust and get back into a normal routine, especially if you are dealing with an illness or a death in the family. You can’t always pick up and go back to living so easily.

So go for 12 months, most will say 3 – 6 months will do and that’s true but if you can do better why not.

How do I know how big my emergency fund should be?

Here are a few things you want to consider when determining how big your emergency fund should be:
1. Is your job steady?
2. Is there more than one income?
3. Is your job commissioned?
4. Are you self-employed?
5. Family size?
6. Is there a family member who has medical issued that require frequent hospital care?

So if you have a steady income and have been working the same job for years and/or have more than one income you should be fine with at least 3 months of an emergency fund, I say 6 months.

If there is only one income in the home, you’re commissioned, self-employed, or have a family member that needs frequent medical attention you will need at least 6 months of an emergency fund, I say 12 months.

Also, if you have a larger family (4+) I would recommend not doing anything less than 6 months.

What’s considered an Emergency?

Well, I guess it depends on who you ask because you may just be overly dramatic to the point where you constitute an emergency as anything that seems important at that moment.

Hmmm like the tv you’ve been eyeing for the past couple of months and now it’s on sale with an additional %30 off. So you call your spouse overwhelmed with excitement to the point you can’t get your words out and you sound out of breath and in disarray to the point some one would think someone has died only to have you say “you know that tv I’ve been wanting, it’s on sale.”


That is not an emergency!

An emergency is basically a life altering circumstance. If you haven’t lost a job, a major illness hasn’t occurred, your roof isn’t caving in, someone in the immediate family hasn’t passed, or there isn’t a foreclosure notice in the mail.

It’s not an emergency.

Do not even consider using your emergency fund as an option for ANYTHING other than a life altering circumstance. Because the way life is setup, as soon as you do that will be when you need it.

How to create an emergency fund?

An emergency fund is one of two savings accounts I recommend families to have, you can read more about that here.

Ideally, you will want to put away 20% of your monthly income into savings. So to get you to that 6 months of reserve fast, you will direct all 20% towards your emergency fund and then once you get to your 6 months you can decrease it to 10% and direct the other 10% to your other savings account.

If you can’t do 20% of your income into your emergency fund do whatever you can until you can build your emergency fund.

Your mindset should be preparing my family for survival.

So you should be creating a budget that includes all of your major expenses such as:

  • housing
  • insurance
  • utilities
  • minimum debt payments
  • food
  • gas

Anything that you have left over goes to your emergency fund.

But if you are like most and you can’t function without cell phones, the internet, cable, Netflix, etc. Then include those also but the more expenses you add the longer it will take to get your emergency fund fully funded.

If you are behind on bills and have no money to fund an emergency fund you need to make some quick changes to your financial structure. Some options include:
1. Look for cheaper alternatives such as switching from Sprint to a Walmart service provider. (Total Wireless/Straight talk has been good to me)
2. Find ways to lower your grocery bills and be conservative when it comes to your gas, water, and electric usage.
3. Have a garage sale or find a consignment store that will buy gently used clothes, toys, or shoes.
4. Increase your income. Sometimes you literally just don’t have it.

What all should your emergency fund include?

Your emergency fund should include all of your major expenses, food, gas and your minimum debt payments for 6 months, much like this:

  • housing
  • insurance
  • minimum debt payments
  • utilities
  • food
  • gas

But I’m going to keep it 100% real with you.

When I think of my emergency fund I think how long would I want my lifestyle to last before I need to get another job. Now I’m not talking about no out to eat every night, buying Gucci and Prada kinda lifestyle. I just want to keep up with my occasional family outings and date nights, ya know the normal stuff.

I don’t want to be having a skimpy emergency fund where I can’t do anything. Just sitting in the house bored as heck.

I want to have fun too, so what if I just lost my job, that’s what preparation is for.

So yeah, I recommend you save according to your lifestyle. If you go on outings and have regular date nights make sure you include 6 months worth in your emergency fund.

Where should I keep it?


And the most realistic option that I know of is an online savings account. I personally use Capital One 360 and it has been amazing. If you sign up using this link you get a $25 bonus. (note: there is a minimum deposit requirement in order to receive this offer.)

Keeping your emergency fund allows it to become “out of sight out of mind.” My money automatically transfers there from my paycheck and if you want to make a withdrawal it’s going to take at least two days to get to you. So the thought of considering it as an option for anything other than an emergency is pretty much pointless.

But if you don’t feel comfortable with keeping an account online and need a physical location, I suggest opening an account at a bank that is not your primary financial institution, a matter of fact find one that you have to drive at least 15 minutes to get to.

Final Words

Now that you know all about emergency funds, it’s time to start putting one in place. Don’t make it a difficult thing and start stressing yourself out because you don’t have one. Things don’t just magically happen overnight no matter how much you may want them to. So don’t make the process hard. Simply start saving what you can and gradually increase when you are able. So that tax refund, holiday and birthday money has a place to go.

Take control of your finances and make it work for you.

Do you have an emergency fund? If not, what are your plans for starting one?


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  1. Gursimrat kaur May 19, 2018
    • Jasmine Golden May 20, 2018

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