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How to Build an Emergency Fund

How to Build an Emergency Fund

An emergency fund is an amount of money set aside to cover larger, unexpected expenses like:

  • Major home repairs
  • Appliance repairs
  • Major car repairs
  • Unexpected medical expenses
  • And unemployment

Having an emergency fund can help protect you from having to borrow funds through a high interest loan or rely on credit cards. This is especially important for those who already have debt, it will keep them from borrowing more. After all, one of the first steps of getting out of debt is not adding to it.

How much should you save?

The experts say three to six months’ worth of living expenses to cover the necessities while out of work or supplement your unemployment. Some savings is better than none so if you are first starting your emergency fund you can start small. The important thing is that you start.

How do you build your emergency fund?

Calculate the total that you want to save. To do this, add up your monthly expenses including, rent/mortgage, grocery, insurance, utilities, phone/internet, car/transportation, debts such as credit cards, and any other additional costs such as childcare or medication. Take that monthly total and multiply it by three for three months’ worth of expenses, or by six for six months’ worth.

Set up automatic deposit into your savings account. Determine how much you can put into savings from each paycheck and have it automatically deposited. This will make the task of saving money less ominous and automatic.

Hold onto your change. When you use cash, put your change from your pockets, car, or wallet into a jar—you will be surprised how fast this adds up.

Save your tax refund and bonuses. Putting these large chunks of money into your account can be a good way to boost your savings.

Don’t dip into it unless you need to. Draw a line between what is an emergency and everything else. Once you have established a reasonable amount in your emergency fund, you can set up an additional savings account for things like vacations, new car, down payment, etc.


As always, if there is anything we at Stockton Mortgage can do to help you achieve your financial goals—lowering your monthly payment, shortening the life of your loan, or investing in a new home—we are here for you, so just ask! Happy saving!

Let us guide you home.