Setting Up and Feeding an Emergency Fund: Tips for Success

Found Money, Saving & Investing / Wednesday, July 30th, 2014

Last summer I decided that it was time we had a proper emergency fund.

We had a garden variety savings account, but that’s not really the same thing.

We had other assets we could have tapped if we needed to – retirement savings, college savings, credit card lines of credit, life insurance cash value. Again, not the same thing.

So I took a small savings account we had with about $2200 in it, called it an emergency fund, and started adding to it.

Over the next year I made some healthy deposits to our emergency fund in the form of a tax refund and some insurance reimbursements.

I added some more modest deposits from credit card cash back checks and Craigslist furniture sales.

And I threw in some downright unimpressive deposits, like the $24 rebate on our dog’s Heartguard medicine.

Together, those amounts grew our emergency fund from $2232 to $11,871.

I’m kind of in love with our emergency fund. I’m still adding to the total (most experts recommend you have anywhere from 3-8 months of living expenses set aside exclusively for emergencies) but I love looking at the progress we’ve made.

If I were talking to myself from a year ago, here is what I would have said to do:

Open a separate savings account and call it an emergency fund.

Emergency money needs to be readily accessible but not too accessible. You don’t want it tied up in CDs or retirement accounts that would be hard to get to or would cost you a penalty to access. But neither do you want it combined with your everyday money – like your checking account – where it could be easily spent on very non-emergency things.

One of our online savings accounts at Capital One 360 works perfectly for our emergency fund. And since Capital One 360 lets you name your savings accounts (you can see how that looks here), calling this account an Emergency Fund reminds me what this money is for.

That’s a little thing, and it’s purely psychological, but it works.

We have another savings account that is attached to our checking account and, in looking at that account register, I see withdrawals for things like my son’s senior trip, patio construction, IRA contributions, and a furniture purchase.

That’s okay; that’s what savings accounts are for. But it’s really easy to pull money out of that account. Having a separate account that lives at another bank and is called an emergency fund says that that money is OFF LIMITS.

Make frequent deposits.

I make several deposits a month into our emergency fund and I make them as soon as any extra money become available. Doing this keeps the emergency fund in the front of my mind and reminds me that increasing it is a goal.

No deposit is too small.

It’s tempting to ignore small amounts (it’s only $25), but when I added up the deposits of $100 or less I made to our emergency fund over the last year (there were 16 of them), they came to over $1000. That’s money worth paying attention to.

So that’s what’s brought us this far. Here’s what’s on my emergency fund to-do list:


I have yet to automate our emergency savings, but I have done it with our college fund so I’ve seen how effective it can be. One way to automate your emergency fund is to have a portion of your paycheck direct deposited there. Another is to schedule a recurring transfer from your checking account to your emergency fund each week or month (tying it to your payday works well).

The recurring transfer is something that could work well for us, but first I want to have a few months of paying for my son’s college expenses under our belt.

Decide on a savings goal.

I don’t have a specific dollar amount in mind for our emergency fund. Right now I just know that I’m happy we have one and it needs to be bigger than it is.

How much bigger is something I need to spend some time figuring out. That sounds like a good idea for a future blog post.

How do you manage and feed your emergency fund?

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9 Replies to “Setting Up and Feeding an Emergency Fund: Tips for Success”

  1. All I know is that when the water heater and furnace waited to go until my husband was unemployed, we were so happy to have an emergency fund. What could have set us way back was, instead, more of an annoyance than anything. In fact, he had the time to shop around and negotiate a good deal. Had we needed financing, he would have had less leverage.

  2. Our emergency fund is pretty established. Any time we spend on an emergency, I usually take a few months to replace whatever amount of money we used. Sometimes I don’t, however, if our emergency fund was getting on the high side.

  3. I would love to read further posts on this topic! We will be finished paying off the last of our debts in early 2015 and then will begin aggressively building up our small emergency fund. I have come up with a number for what 3 – 6 months of expenses for us should be but would love to see the process that you use and any other tips/thoughts that you have. Thanks!

    1. Congratulations on your debt payoff, Elise! That’s exciting. I’ll keep you posted on the number we choose and our thought process. That part is proving to be more challenging than I expected.

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