Coins in an emergency fund jar

Five tips for building an emergency fund without a big savings account

One of the number one rules of getting your financial life in order is to set up an emergency fund. But what can you do to build an emergency fund if you don’t already have a big savings account to draw from?

Set a goal

The first step in building an emergency fund—whether you have a savings account or not—is to set a target savings goal. How much do you want to save? How much do you need to save? For an emergency fund, you should aim to have between three and six months’ worth of expenses saved up. If you have a non-traditional job like freelancer, or if you have a seasonal job, you might want to save up even more money. The point of an emergency fund is to protect yourself financially if you lose your job or have a major expense that you need to take care of.

Start small

Once you’ve determine how much money you want in your emergency fund, you’ll need to begin setting some money aside. You should start small by putting your loose change in a piggy bank or setting up an automatic savings plan through your bank for one per cent of your paycheque.

Ultimately, the goal is to save at least 10 per cent of your paycheque. However, going from zero to 10 can be overwhelming for some people, and can cause them to fail with long-term savings.

Cut expenses

Next, you’ll want to look at your budget to see where you can cut expenses. Don’t have a budget? If you’re serious about building an emergency fund, you’ll need to make an attempt at budgeting to figure out where your money is going and where you can cut expenses.

Use any savings you end up with as additional money to contribute to your emergency fund. Getting a new insurance quote or consolidating your debt can add up to hundreds of dollars in savings—money that can go a long way towards saving up three to six months’ worth of living expenses.

Make more money

Once you’ve cut corners as much as you can and put some money into your emergency fund, it’s time to make more money. There are a variety of ways to do this. You can get a side hustle or second job, you can ask for a raise, or you can get a higher-paying job. Any of these will help substantially in building your emergency fund, as long as you take your additional earnings and put them straight into your savings account.

Bonus money

Finally, take all your bonus money—birthday money, tax refunds, year-end bonuses—and put them into your emergency fund. This money is easy and painless to save because it’s not part of your regular income, so you haven’t earmarked it to buy anything yet.

You can build an emergency fund without a big savings account. These five tips can help anyone, with any income, get the money they need to have an emergency fund to protect their financial interests in times of financial hardship.