How to Start an Emergency Fund

Practical ways to help you set up an emergency fund to get you through potentially difficult times.

5 min read

For many Americans, setting up an emergency fund hasn’t been a top priority. Studies show that nearly a third of adults in the U.S have no emergency savings at all. With day-to-day expenses, rent or mortgage payments, utilities, and occasional purchases, creating a safety net is one of those things you might not usually think about until it’s too late. In light of the current global health crisis, having an emergency fund to get you through hard times might have become more important than ever before. Even if you don’t currently have three months’ worth of living expenses stashed away, there are things you can do to make sure you’re prepared should the unexpected happen.

Keep in mind that there’s no need to create an emergency fund in one go. Saving is about creating habits that work with your life, and even starting a dedicated safety net and putting some money aside is a great first step. Read on for some practical ways to help you set up an emergency fund to get you through potentially difficult times.

Figure out how much you need

The first step to having a solid emergency fund is calculating how much you actually need. Financial experts recommend that you have between three to six months of living expenses set aside in case of emergencies. However, understanding what this entails should take into account a few factors:

  • How much do you usually take home in pay after taxes?

  • How much are your rent or mortgage payments?

  • How much do you usually spend on food?

  • Are there any fixed bills or payments you must make every month?

An easy way to find a target savings amount is by calculating your post-tax monthly income and multiplying that times three. If you’d like to take a more nuanced approach, factor all of your expenses, and multiply that by three or six. Creating an emergency fund is as much about understanding your own situation as it is about putting money aside, so you’ll also want to consider the stability of your employment status or any fluctuations in income due to commissions or freelance work.

Create a dedicated home for your emergency fund

An emergency fund should be separate from your savings, so having an easily accessible dedicated home for this type of goal is crucial. Not only will it allow you to quickly withdraw money when you need it the most, but it will help you avoid spending it, or redirecting money to cover other expenses. When you bank with N26, you can use Spaces to create a dedicated “emergency fund” that will allow you to quickly drag-and-drop money from your primary account, set savings goals, keep track of its growth, and instantly move money in and out of the account without incurring fees. Even if the total amount you’ve calculated for your emergency fund seems intimidating, setting up a dedicated place to have your emergency fund is an important first step to working towards this goal.

Find the right amount to get started

Deciding how much should go into your emergency fund to get it started is probably the most personal part of this process. There is no “right” amount for this step — whatever you choose to set aside should work with your particular situation and comfort level. If you don’t have a significant amount of savings to help you get started, there is absolutely no need to panic. If you have a tax refund coming, or a stimulus payment that you don’t need to cover essentials, consider using at least part of it to create an emergency fund. If you have a separate savings account, you could also redirect part of it to help you get started. Keep in mind that the more unstable your employment situation might be in the face of the coronavirus outbreak, the more you might want to put aside right now.

Create a schedule to save

Like all forms of saving, starting an emergency fund is about developing a habit of putting money aside. Take some time to determine how much of your paycheck you’re able to comfortably put away to help you meet your goal, and create a ritual of moving money to this account with a regular cadence – perhaps once a month or every time you get paid. It’s completely understandable that in uncertain times your situation might change from month to month, and this could affect how much you’re able to set aside. Even if you’re not able to put away the same amount each time, having a schedule will help you take things one day at a time, and develop a healthy habit of saving money.

Stay motivated

While you might want to lay out a more complete roadmap and timeline to help you figure out how to meet your goals, do so only if you feel comfortable with the parameters. Deciding that you want to reach your emergency fund goal by a certain date might help you stay organized, but it shouldn’t be at the expense of your financial well-being. If the unexpected happens, and you need to dip into your emergency fund, know that it’s okay. You can always start saving again once your financial situation stabilizes, after all, that’s what emergency funds are for.


We know these are uncertain times, and we want to assure you that we’re here for you. If you have an N26 account, you can use Spaces to start an emergency fund today. Don't have an N26 account yet? Sign up now to experience banking from the comfort of your own home.

The N26 account is offered by Axos Bank®, Member FDIC. N26 Inc. is a service provider of Axos Bank. All deposit accounts of the same ownership and/or vesting held at Axos Bank are combined and insured under the same FDIC Certificate 35546. All deposit accounts through Axos Bank brands are not separately insured by the FDIC from other deposit accounts held with the same ownership and/or vesting at Axos Bank. The N26 Visa® Debit Card is issued by Axos Bank pursuant to a license by Visa U.S.A. Inc. The N26 Visa Debit Card may be used everywhere Visa debit cards are accepted.

Related posts

Maybe some of these will interest you