Life is unpredictable. Expense are going to come up that never made it into the monthly budget. A vehicle could break down or the furnace could quit in the middle of a Wyoming winter. A family medical emergency may also require travel — another large expense. Have you found a way to set something aside for these sorts of outlier situations?

It’s easier said than done, we may think. But financial professionals often recommend finding a way to make it work because an emergency fund provides a financial cushion outside of credit cards, loans, or retirement accounts.

The good news is that you do not need to save thousands of dollars overnight. You can learn how to build an emergency fund with small, consistent steps.

What Is An Emergency Fund?

An emergency fund is money set aside specifically for unexpected expenses or financial emergencies. Think of it as financial breathing room.

While you might have a regular nest egg of savings waiting for big purchases or splurges like vacations, holiday shopping, vehicles or first time homebuying, an emergency fund is set aside for one purpose: to help you manage a sudden crisis.

What Counts As An Emergency?

If you’re open to using the saved money for planned expenses, it’s not an emergency fund. Even if it’s held in reserve, how would you define an emergency?

A new television is not an emergency, but what if your current one breaks? Is replacing it an “emergency”? Still, in most cases it may not rise to that level, as the majority of serviceable TV purchases fit in a manageable range of about a hundred to a thousand dollars.

A planned home improvement project is a much more substantial investment, perhaps even tens of thousands of dollars, but it’s still not an emergency.

Emergency funds are generally reserved for situations such as:

• Major vehicle repairs: You may need the vehicle to commute, and it could take thousands of dollars to fix.
• Unexpected medical expenses: Operations and hospital stays are often expensive, but can be life-saving.
• Emergency home repairs: If the roof has been damaged by a fallen tree limb, rain could cause extensive water damage and even greater costs.
• Job loss or reduced income: The fund is a lifeline to keep things afloat until employment or supplementary income eligibility has been sorted out.
• Urgent family travel: For example, to attend a wake or funeral for the passing of a close family member who lived across the country.

A simple rule is to ask yourself whether the expense was unexpected, necessary, and time-sensitive. If the answer is yes, your emergency fund may be the right tool.

It’s a Marathon, Not a Sprint — Start Small

Plenty of folks never begin to save because the end goal looks so big and hard to achieve. If you’re aiming to reach savings that match three to six months of expenses — a good level for a baseline emergency fund — that can feel really overwhelming at first.

And large monthly savings targets are big stressors. That might be tough to sustain. If saving aggressively causes you to abandon the plan after a few months, it probably wasn’t sustainable in the first place.

Instead, focus on the first milestone. Aim for your first $500. Even if it takes a few months to save it. Then work toward $1,000.

Those amounts may not cover every emergency, but they can cover many of the most common financial surprises families face. You could replace a cracked windshield, for instance.

And small wins create momentum! The important thing is to choose a realistic amount and only increase the size of savings deposits when income allows.

Make Saving Automatic

The easiest way to start building an emergency fund is to make sure you don’t even need to think about it. Automatic transfers allow money to move from checking into savings on a regular schedule. Even modest amounts can add up over time. A transfer of $25 per week creates $1,300 in savings over a year.

A lot of people like to use a microsavings approach, too. Our Transfer the Cents program lets you round up the cents on small daily purchases to the nearest dollar, and transfer that spare change into a savings account. Over time, that can really add up without you even noticing it. We don’t see quite as many change jars as we used to, but it’s the same idea for a world where many purchases are now made online, with payment apps, or with credit and debit cards.

Look For Extra Opportunities To Save

You may be wondering how to build an emergency fund quickly without feeling overwhelmed — or if that’s even possible. While automatic transfers are powerful, there are other opportunities to speed up your progress.

What better way is there to prepare for unexpected expenses than with unexpected income? Consider putting any extra sums of money that you come into toward your emergency fund. We’re talking about things like:

• Tax refunds
• Bonuses
• Overtime pay
• Cash gifts
• Side-income earnings

Many families reach savings goals faster by dedicating at least part of these windfalls to emergency savings rather than spending all of them immediately. This is also a great way to kick off your first emergency fund or grow one fast.

Keep Emergency Savings Separate

Emergency funds sometimes disappear because they’re mingled in the same accounts as everyday spending money. You might, in theory, consider a certain portion of the account’s balance to be “for emergencies,” but it’s harder to be firm about that when regular bills and gas refills are coming out of the same account and it’s easy to thoughtlessly access.

Keep those emergency savings in a separate, dedicated savings account to create a healthy barrier. It will be easier to protect from impulse purchases and routine expenses when it’s out of sight, out of mind.

Adjust Your Goal As Life Changes

An emergency fund is not a one-time project. Life has stages, and as it changes, your savings goal may need to change as well.

Someone living alone may need a different emergency fund than a family with children. A homeowner may face different risks than a renter. A business owner or seasonal worker may want a larger reserve than someone with highly predictable income.

Review your emergency savings periodically and adjust as your circumstances evolve.

It Takes a Village… Or a Community Bank!

Come on in to your local branch of Security State Bank Wyoming in Basin, Worland, Gillette, or Sheridan. Generations of families in our communities have relied on the friendly service and local expertise of our bankers for convenient savings. Many customers also benefit from tools that help automate savings and track progress over time.

You can open a savings account or talk with our staff about ways to work toward financial goals while keeping funds accessible when they are truly needed. We’re here to help you set up for emergency savings and prepare for whatever comes next.