Emergency Fund Strategies to Help You Pile Up Cash

Emergency fund strategies for when life doesnt go as planned

A good emergency fund is one of the foundations of a great financial life. In addition to providing a safety net and sense of security, emergency funds can actually help you build wealth by preventing you from taking on expensive debt by borrowing money. So how do you go about building one, especially if it feels like you’re already short on cash?

There are three main strategies you can use:

  • The “go crazy” emergency fund method
  • The “take advantage of windfalls” to build an emergency fund method
  • Percentage-based emergency savings

Before I get into the strategies in detail though, let’s talk about how much of an emergency fund you should have on hand. Basically, it depends on where you’re at financially already.

How big of a fund to have

If you don’t have an emergency fund at all or are deeply in debt, start out small. A thousand dollars is a good starting point. If $1000 seems impossible at first (and I’ve been there) start with whatever amount you think would work for your situation. Eventually, you’ll want to build up your emergency savings to anywhere from 3-12 months’ worth of expenses.

Advice from experts vary, with Suze Orman recommending 8 months of emergency savings, Dave Ramsey recommending 3-6 months once you’re debt free but the house, and Mary Hunt recommending a contingency fund with either $10,000 or 3 months’ worth of expenses. Personally, I err on the side of 12+ months, because I’ve experienced long term unemployment in the past.

The “go crazy” emergency fund method

If you’re living paycheck to paycheck or having difficulty getting an emergency fund started, this method is probably best for you. It amounts to making building up your emergency fund the priority for a very short period — say, a week or two. During that time, you go crazy doing everything you can think of to make extra money to put toward the fund. Babysit, walk dogs, rake leaves, have a garage sale, tutor kids, sell a toy, sell your DVDs on eBay, working overtime — whatever you can think of.

Then put every dime toward your emergency fund. You’ll only be doing it for a week or two, so resist the temptation to “reward” yourself by spending money because you’ve been working so hard. Your reward will be a nice little start on your emergency fund, and the sense of accomplishment that comes from doing something that will help you in the long run.

The “take advantage of windfalls” to build an emergency fund method

This one’s pretty self-explanatory. Getting a tax refund? Great! Use it to start your emergency fund (and then make sure you’re having the correct amount withheld from your paycheck.) You can use bonuses, inheritances, and gifts to start your e-fund too. The important part is to put the unexpected money to good use in an emergency fund instead of being tempted to spend it because it’s found money, or money that’s outside your budget.

Percentage-based emergency savings

This method works best once you’ve gotten a small emergency fund started, and you feel pretty in control of most of your financial life. As you might guess, percentage-based emergency savings means that you decide on a certain percent of your check to send to your fund each time you get paid. Then you send that money first, and don’t touch it except in the case of an actual emergency. If you get a raise, you can just increase the percentage to build your fund faster — and then use the money for retirement or other goals once your emergency fund is where you want to to be.

No matter which method you choose (or methods, since you can always combine them), remember that the important thing is to start saving something for emergencies, and to replenish the fund if you need to use it.


  • These are excellent tips for beginning and continuing an ER fund. My fund is still on the small-ish side, but when I first started, I started small. I budgeted a percent of my income towards it and stuck with it. Any extra windfalls I came into helped to pad it. I still use the percent and windfall methods to continue building it up. Hopefully next year (once I’ve finished my credential program) I’ll be able to boost that percentage and get aggressive with my ER fund.

  • I like your way of thinking of options for contributing to an emergency fund. It really depend on one’s financial situation to some degree as well.

    I suspect that it’s the people who don’t have any kind of emergency fund that are the ones who most need an emergency fund. Just taking action in one of these ways and getting money in the fund is a good start. It’s vital to have such a fund, as most of us will have some disruption of some kind in terms of our incoming cash flow. We may not know when, but you just have to prepare for when it does actually happen.

    • You’re completely right — people who don’t have one are the ones who most need one. That’s because emergencies of some sort will happen to everyone eventually, even though we wish they wouldn’t.

  • Certainly having an emergency fund gives you peace of mind, you also feel good knowing that you have something to fall back on.

    • I think it gives you a sense of accomplishment too. (“Look, I was able to save that money.”) That makes things go better for you all around too.

  • I’m on your side Jackie. When disaster strikes an emergency fund up to 12 months worth is a life saver. If you can’t build the e-fund to 12 months then 9 is the next best thing. 3 months is better than nothing but not enough. You never know how large your problem or how long the emergency may last. The recession has proved that all heck can break loose and you better be prepared.

    Charles W. for WEALTHfaire

  • Petunia

    My question is what to do with the emergency fund once I have it. Savings? CDs?

    • Good question. I would put it somewhere safe like a savings account. Because I have a pretty large emergency fund, I have some of mine in just a plain old savings account where it’s easily accessible, and then I have some in laddered CDs that come up for renewal at different points. My thought there was that the savings account would be for immediate emergencies, and the CDs for longer term ones like being out of work for a long period. The main thing though is not to try to make money with your emergency fund; but just to have the money available.

  • We are currently using the “Go Crazy” method to turbocharge our debt snowball and will continue to use that method for fully funding our emergency fund. We are socking every extra penny we can come up with towards our debt snowball so that we can get to work on the emergency fund.

    Our situation may be a little different than some others in that we reduced our savings down to $1,000 (Ramsey Baby Step 1) and applied all of the extra money towards debt and I must say it is quite the motivator. I feel like I’m walking a high wire without a net because our current emergency fund is so small. I have sold stuff on eBay, CraigsList and Half.com and will continue to sell everything I can to get our debt erased once and for all. We can’t wait to start building the emergency fund.

    • Oh good point — “go crazy” is a great way to dig into getting out of debt too. Sounds like you’re doing great!