Week 4: How can I start building an emergency fund?

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Wealth Builders Weekly
January 24, 2025

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Week 4: How Can I Start Building An Emergency Fund?

In 20+ years as a financial professional, this is what I see many clients skip or are short. It’s easy to do. Life has so many alluring distractions for our dollars that should be allocated for emergencies.

Sitting in cash today feels like a huge opportunity cost for many of us. It sucks when you know you could invest it and make significant gains. Or spend it this year on a life changing travel experience.

Many of us just don’t know when the next large expense is ahead of us. It’s not going to show up at conveniently timed intervals in life. It may happen the month you lose your job, your A/C goes out, and your child needs a major surgery. Therein lies why an emergency fund is so key.

Start Small

  • 3 to 6 months’ worth of living expenses can take years for many.

  • Aiming for $500 or $1,000 as an initial goal can feel more achievable.

  • Once you hit that target, keep building until you reach a level that feels secure for your situation.

Squirreling away can pile up over time.

Out of Sight, Out of Mind

  • Keep 1 month of living expenses in your checking account,

  • Keep 1 month in savings that is quickly accessible at your bank.

  • Everything else should be in a separate high yield saving account to avoid the temptation to dip into it for non-emergencies.

    I make a HYSA available for my clients. It currently yields 4% and adding funds is easy. It can be automated, accessible from your phone anytime.

Supplement With “Found Money” 

Got a tax refund, bonus, or cash gift? Put a portion—or all of it—into your emergency fund. It’s an easy way to give your savings a quick boost. Learn more here:

Consider side hustles or freelancing to help you reach your goal fast. Learn more here and here.

Know Where You Stand

  • Building an emergency fund takes time and discipline, but the peace of mind it provides is worth the effort.

  • Tools like Right Capital’s Dashboard make this easier on you. See the below example:

    • Goal: $16,080

    • Current Balance: $12,358

    • Savings Remaining: $3,722

    • At a very reasonable $100 per week savings rate, this client will be at goal in less than a year.

I provide comprehensive fee-only financial planning and investment management for clients in the St. Louis area and nationwide virtually.

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