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Yes, You Need An Emergency Fund. Here’s How To Start In 2022 (Even If You’re Still Feeling Behind) 

Lindsay Mott  |  December 27, 2021

You’ve been putting off your emergency fund, but it’s more important now than ever. You can get started saving today, even with just $1.

The pandemic has taught us a lot of things. Many of those lessons we may wish we never had to learn, but we learned them nonetheless. Perhaps one of the most indelible is the importance of having an emergency fund for whatever life throws at us. If you’re still recovering from the financial fallout of COVID, saving for a future emergency may still seem like a distant dream for “one of these days” — but there are creative ways to start adding to your stash now that won’t impact your daily life, even when times are tight. 

Brian Hamilton, the CEO of One, a digital bank built specifically around the needs of the American middle-class, says it’s possible for someone living on the average American income to save approximately $6,000 over the course of 12 months. Which sounds incredible, and like music to our saving-money-loving ears. Here’s a rundown on how you can make it happen in 2022.  

How much do you need, exactly? 

The general rule of thumb with emergency funds is to have three to six months of your net income set aside for an emergency. Ideally, you’d set aside three months if you have a dual-income household, and six months if you have a single-income household. (The idea is that if you have a dual-income household, the chances of both of you losing your job are slim… but the pandemic taught us that sometimes the worst really does happen. The goal is that you have enough set aside in your emergency fund to make you feel like you have cushion that will last you until you can get “back on your feet.”) Yes, that’s a lot of cash, but the goal isn’t to save it as quickly as possible — the goal is consistency, and saving wherever and whenever possible. 

READ MORE: Moving? Here’s How To Keep It Budget-Friendly

“Our favorite way to think about creative savings is really breaking down your goal into tiny pieces,” says Lauren Pearson, managing partner and partner of Somerset Advisory, a wealth management firm in Alabama specializing in family financial planning, and co-founder of The Wealth Edit, an online, membership-based community educating women on how to develop modern skills for personal finances. “So, if you would like to save $6,000 in, say, four months, that means you would have about 120 days to save. You would divide your goal by the number of days, which in this case is $50 per day.” And if that sounds like too much, then decide what’s doable for you. At even $2 per day, you’re looking at more than $600 saved by the end of the year. Go, you! 

5 Ways To Save For Your Emergency Fund This Year 

Create a Budget 

This may seem obvious, but statistically, the majority of people do not have a pre-planned budget, Hamilton says. Create a realistic budget that will allow you to save, while still enjoying the money you work so hard for. Take a look at some of your higher spending categories and see if you can cut back for a few months. Specifically, look at dining out, streaming services, and other non-essentials to start. 

LISTEN to the HerMoney Podcast: Budgeting Without Tears 

Pearson says a good way to get started is to cut out any “low hanging fruit” expenses — think of subscriptions you don’t use, gym or athletic memberships you rarely enjoy with the pandemic,  clothing, and so on. 

Automate Your Savings

You’ve heard this one before right? That’s because it’s proven to be the best way to get yourself to save, even when it feels like nothing else works. When you’re setting aside money before you ever have the chance to spend it, it’s truly out of sight, out of mind. Set an automatic transfer from your checking account into your savings account, or find an app you love that will do this for you automatically, so you’re always putting your savings goals first. 

Look To High-Yield Savings Accounts 

The variance between APY (annual percentage yield) offered from bank to bank can differ dramatically, and even half a percentage point can make a difference in your balance at the end of the year. No, high-yield savings accounts don’t pay as much as they used to, but you should still look to them as a good way to save an extra few dollars. When you’re saving and earning interest that goes back into your account, the amount can compound quickly with a higher rate. This may be a good time to shop around for a higher rate. 

Don’t pay a penny over 16% interest on your credit card 

Do you pay your credit card off at the end of every month? Ideally, that’s the goal, but things happen and sometimes we end up carrying a balance. If you are paying 20% or 25%, it’s time to shop around for a new card, Hamilton says. If you love your card, call to ask if you can get the APR lowered, but if that doesn’t work, it’s time to switch to a different card.  

“The best thing we can do today is continue to save when possible, try not to rack up debt with high interest credit cards, and consider consolidating existing debt at a lower interest rate,” Hamilton says. 

READ MORE: What To Do If You’re Going To Miss A Credit Card Payment

We know the pandemic has been tough on households across the country — if you were hit financially, know that all of us here at HerMoney are rooting for you. Don’t lose sight of your end goal — where do you want to be financially when the pandemic is a few years behind us? You can start working towards it now, even if you’re not 100% where you want to be. 

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