Download Acrobat Reader 5.0 or higher to view .pdf files.
Skip Navigation

To Do: Build an Emergency Fund

Spring and summer bring stormy weather. If Mother Nature damages your property, do you have enough money saved to cover your insurance deductible and repairs?

Life happens, and while we can’t predict it, we can be prepared for it. If you want to take control of your financial future, building an emergency fund should be at the top of your to-do list.

What is an emergency fund?

An emergency fund is like your financial safety net, ready to catch you when unexpected expenses or emergencies arise. It's a stash of money set aside specifically for life's curveballs, whether it's a medical emergency, a sudden home repair, or even unexpected job loss. Essentially, it's your "just-in-case" fund, empowering you to tackle whatever life throws your way.

Why is it important?

Imagine that your car breaks down suddenly, leaving you with a hefty bill and maybe a couple days without transportation to your job. Without an emergency fund, you might have to borrow money or dip into your savings meant for other goals. You could fall victim to predatory lenders that charge up to 400% APY or go into credit card debt at high interest rates.

Having an emergency fund means you can handle these unforeseen expenses without disrupting your financial goals or going into debt. It can act as a buffer, giving you the freedom to navigate life’s surprises with confidence.

As important as it is, only about half of U.S. households had emergency savings to cover one month of income in 2022, according to the Urban Institute. Not having an emergency fund greatly increases your likelihood of falling into financial hardship, particularly if you are a tradesperson or laborer with fluctuating income.

If you don’t have emergency savings, my advice is to start today with whatever you can afford.

How to Get Started

  1. Open a savings account. You don’t need a significant investment to open an account, but talk to your banker to make sure you’re meeting your minimum balance requirement. Your banker should have a no-cost account option as well.
  2. Automate it. Set up the account so that a certain amount is automatically transferred to it from your checking every month or pay cycle. Treat it like every other bill that needs to be paid.
  3. Set a goal. The amount you need in an emergency account is different for each individual. A single college student would require less emergency funds than a family of five that owns a home and two vehicles. Evaluate your budget and expenses. Think about worst case scenarios. If you lose your job or experience a slowdown in income, how much would you need to get by?

How to Build the Fund

  1. Prioritize it. Emergency funds are a necessity. Make a commitment to fund it consistently, and only use it when you absolutely have to. If your finances get tight, your emergency account should be the last to get cut.
  2. Trim unnecessary expenses. Take a close look at your budget and cut out what you reasonably can. Whether it’s dining out less often or canceling subscriptions, redirecting that money into your emergency fund can accelerate your savings.
  3. Allocate windfalls. Whenever you receive unexpected windfalls, like tax refunds or work bonuses, resist the temptation to splurge. Instead, funnel these extra funds directly into your emergency account.
  4. Monitor and adjust as needed. Life is unpredictable, and your financial situation may change over time. Periodically reassess your emergency fund goal and adjust it as needed. As your account grows, you may be able to transfer some funds into a higher yield product, like a certificate of deposit, to earn a higher interest rate. And if you dip into your fund for a legitimate emergency, make it a priority to replenish it as soon as possible.

Even if you start small, with consistency the payoff is big: financial stability and peace of mind. If you’re ready to take control of your financial future, give Midwest BankCentre a call at 314-631-5500. One of our banking specialists can help you set up a savings account, or you can open one online in minutes at Start saving today to prepare for the uncertainties of tomorrow!

Originally published in Labor Tribune's June issue of 2024 by Wes Burns, EVP of Community and Economic Development.