How to Save a $1,000 Starter Emergency Fund

As the name states an emergency fund is for unexpected events or emergencies. The fund allows for money to be available when an incident occurs to help pay off needed expenses. 

Typically if money is not available credit cards can be the main fund or source for expenses. The car breaks down and no cash to cover fully what's owed? Most will charge to their credit card. This increases debt, making it more of a burden to pay off if there is a current balance on the account. 

Emergent events that occur can range in price. A flat tire versus a water leak in your house can vary drastically for example. This can make it hard to know how much needs to be readily available.  It's typically suggested to have 3-6 months worth of your income saved to help cover unexpected events. 

3 to 6 months of savings is A LOT, to say the least. Starting with $1,000 in savings is a great way to help get most small accidentals covered or even put a good dent into a larger expense.

For me, I decided to have a cushion of money to help with any unexpected expenses that may have occurred while paying off debt. My goal was to start with a $1,000 emergency fund and build on it. I knew having 3 to 6 months of expenses was important for me but definitely wanted to take the slow and steady approach starting off. 

At the time I was paying off my student loans. I thought if I was ready to aggressively pay off my debt then my starter emergency fund should be funded pretty quickly. Though I had some bumps in the road I will share the things I did to get started and fund my first $1,000 emergency fund.

How To Save For A $1,000 Starter Emergency Fund

1.Set Up a High Yield Savings Account

To start my fund I decided to open up a savings account that was separate from all other accounts to prevent me from touching the money. I would consider starting with a high-yield savings account to gain more interest on the money you put in. Interest will help boost your savings monthly by adding a little extra to your total contribution. Over time as your account balance increases the monthly interest will as well adding a boost to reaching your goal sooner. 

I currently use Ally because of the bank's account organizational buckets and the high interest rates.  After saving and moving my money to a high-yield interest savings account I was able to see it grow so much faster with the interest added to it monthly. There are other high-yield saving accounts out there as well that are available to compare. To date, Ally's interest rate is 4.25%. Though interest rates change, Ally has always had a rate that was way over the national average. 

If spending money is just something you constantly struggle with and you are not able to stop using your savings for other expenses I do suggest the old-fashioned piggy bank. Even though stashing cash does not keep up with inflation or have high interest rates it's better to start and have a fund instead of constantly spending your savings and having no fund at all. 

2. Commit to Saving

When starting to save money for any reason, starting at $0 can be hard. I'm here to tell you just start. Literally, every dollar adds up. When starting my emergency fund I committed to the saving, not the amount. This allowed me to focus on the act of saving and developing a consistent habit and not the fact that it wasn't where I wanted it to be.

I first started with five dollars until I could slowly adjust my budget and spending to contribute more. I knew saving was an adjustment to managing my money therefore I just needed to start. Making small contributions allowed me to not feel a large impact on my day to day spending. I was able to see first that saving was possible. 

 I proved to myself that I could be consistent which helped me believe it was possible to reach my $1,000 goal. It also motivated me not to pull from the fund when I felt tempted and I felt more motivated to want to contribute more. Starting with any amount that works for you is okay, it is really important to just start and get in a habit of saving. 

3. Visuals

In my post 6 ways to be financially consistent, I mentioned debt free charts. These charts were absolutely amazing with keeping me on track. With every contribution I could see how it moved me closer to my goal. I could also track how much I contributed each time. This was great because if there was a period where my contributions fell short I knew why and made adjustments if I could.

Having a visual can help you see exactly where you are so you know what adjustments need to be made. They can also help with seeing what you have done, especially if it seems like you aren't moving.   

4. Define your emergencies 

It's very easy to dip into your savings when you need money. Having a separate account for your emergency fund is one way to help grow your fund, another is to define your emergency. Many times emergency funds are attempted to be filled, but are easily emptied due to "emergencies" that aren't quite serious or well, emergent. Spending on things like furniture, vacations, or even upgrading your car are not expenses intended for emergencies.

Impulsive buying is a huge factor to think about as well when it comes to pulling out of your savings in general. Contributing to other types of expenses is going to make it difficult for you to fund your account simply because there will always be something to buy. If something is broken or needs an upgrade ask yourself if it really needs to be replaced in the moment. Are you able to function in your day to day without it? 

I only used my emergency fund when my life was disrupted. For example, the money went to car repairs and supplemented for the costs I could not cover. Other examples of expenses for an emergency fund are, house repairs, medical emergencies, or loss of income. Even things like your phone breaking to the point of which it no longer functions could be an emergency. It's important to define what you are willing and not willing to spend your money on to ensure the fund is there for when you truly need it. 

5. Know Your Why

Defining my emergencies allowed me to know what qualifies for the use of my emergency fund. Understanding my why though is what helped keep me going even when I ended up taking steps back.

I knew I needed an emergency fund to keep myself from going into more debt. I wanted to rid my debt so badly, therefore I saw an emergency fund as a step in my debt pay off journey. Understanding that I needed a cushion of money to help support me while paying my debt off was my motivator to get my first $1,000 funded.

As I slowly saw my savings increased I felt more and more comfortable if something unexpected occurred. Once I had my emergency fund started I felt like I could "breath" and focus more on my debt pay-off plan. 

6. Be Aggressive 

Unfortunately, during the time of saving my fund, I was driving a 1994 Plymouth Acclaim that continued to break down.  I had to use my savings to pay for repairs and it seemed like every time I would save and start feeling good about the amount growing, it would completely empty out. When I started it was very discouraging and I knew I needed to get over the hump by having enough cash available to not wipe out the fund completely.

For a short time (about 2 months) I committed to setting a budget that allowed me to contribute to my fund aggressively. I was in a place where I could pick up extra hours at work to help out as well. Getting a jump start and making a few sacrifices for a short period of time was very helpful in getting me over my hump.

After around 2 months, I had enough in place to help me feel confident to get the rest covered. I stayed consistent and kept saving. After a while, I reached my goal of having $1,000 for a starter emergency fund. The feeling was so relieving but also just accomplishing. I knew if I could overcome the obstacles and still keep going I could do the same with my debt which was a much bigger mountain to move. 

In Conclusion

I definitely encourage you to just simply start. Saving is a long term benefit. We don't always notice it's impact or results right away, but when we need it it can be a huge relief. Starting with $1,000 to save for an emergency fund will help develop consistency and motivation to continue and even accomplish other goals. It will help give support when the unexpected happens.

Ready to start your emergency fund and get ahead in unexpected expenses? Start today by setting aside a small amount and commit to saving. Feel free to reach out to me or comment below and share your commitment. Look forward to hearing from you!