6 Secrets to Building an Emergency Fund

5 min read
Woman considers how many credit cards she should have.

If you’re struggling to make ends meet this year, you’re not alone. Amid the ongoing coronavirus crisis, roughly 30 million Americans still face unemployment, compounding existing struggles for workers who were already living paycheck-to-paycheck. For many of us, it created even more of a reason to build an emergency fund and redefined what budgeting means to us.

What is an emergency fund?

An emergency fund, or emergency savings, is a personal bank account that you set aside in case of emergencies. Emergency funds aim to cover large, unexpected events such as medical expenses, home repairs, and other unplanned life events.

6 Secrets to Build Your Emergency Fund

If 2020 has taught us one thing, it’s that we need to be as prepared as possible for the unexpected. In these difficult times, finding the mental space to build a complicated savings plan(or do any kind of planning at all) may feel far from doable. But take heart. You can grow a solid emergency fund without adding to the stress you’re already feeling. 

1. Your emergency fund savings goal isn’t set in stone. 

Experts generally recommend saving three to six months' worth of expenses in your emergency savings account. While this is a good rule to live by, right now that can be difficult for many—if not downright impossible. 

What to do instead? Try reinventing your goal.  

For example, you might start by saving up enough to cover your essential expenses for one month. After you’ve reached your goal, you can build to two or three months' worth of expenses. Add non-essential expenses like your smartphone data plan to the mix. Or, start saving for unexpected expenses like car repairs or medical bills. 

The important thing to remember is that it’s you who gets to decide what your goals are. And as your life changes, so can your goals. 

Need a little help deciding what a reasonable goal might look like for you? Start by tracking your fixed and variable monthly expenses. 

Examples of fixed expenses include: 

  • Mortgage or rent 

  • Auto payments and insurance 

  • Health insurance 

Variable expenses include: 

  • Groceries 

  • Utility bills 

  • Pet cost and care 

Once you know your monthly expenses, use that number as a baseline to set your first goal. 

2. Save what you can.

We have a tendency to “go big or go home.” Once we set our minds to something, we want to get it done as fast as possible. And often, when we think we aren't keeping up, a lot of us end up frustrated, anxious, and down on ourselves.  

But the truth is, very few people can build emergency funds overnight. Saving takes time. And we all have financial emergencies and unexpected events that can set us back from time to time. 

If you’re feeling stressed, start small and start saving what you can. For example, try canceling a few streaming subscriptions. Once you've saved enough money to cover a weeks' worth of groceries, give yourself a high five. Or, try dropping those meal boxes or other conveniences until you’ve saved up enough for one month’s rent. Any extra money you set aside is worth celebrating, no matter how small. 

3. Peace of mind comes from small changes.  

Making small changes over time can help you save money in the long run. 

For example, say you’re having lunch delivered at $35 a pop three times a week while working from home. That adds up to $105 per week or $420 per month. If you cut down to one delivery per week, you’d save about $280 a month you could put toward a rainy-day fund. 

Making small changes to your spending habits over time can help you build savings and reduce your living expenses, especially if you're living on one income. Be persistent because it may feel challenging at first. Your momentum (and your confidence) will build once you see your emergency fund start to grow. 

Not sure where to start? The key is to look for small moves you can make without feeling overwhelmed by change. For example, leave your debit card at home and pay for groceries in cash. Set up a direct deposit to your savings. Or bike to work. Any positive change in your spending habits(again, no matter how small) will make a difference.  

4. Set an emergency fund deadline.  

Setting (and consistently reaching) a deadline is a great motivational tool to help you reach your financial goals. 

Once you have your first emergency fund goal in place, set a reasonable deadline to reach it. Once you know you can meet. Many personal finance apps track your goal progress. Simply circling a date on a wall calendar works, too. 

If you find yourself still struggling to stay motivated, try creating micro-deadlines. Break your goal into chunks and set target dates for each. As you reach each micro-deadline and your minimum balance grows, you'll feel motivated. 

Keep in mind while you want to try to reach your deadline, life isn’t always clear cut. If you face a job loss or have an unexpected expense, don’t throw in the towel. And don’t get down on yourself. Just move that deadline ahead to a new reasonable target—and keep saving at the next reasonable opportunity. 

5. Kick debt to the curb.

High-interest rates could be cutting into your savings. In 2019, Americans were carrying $6,194 in credit card debt on average, according to Experian. 

If you can afford it, repaying debt while you build your emergency fund could save you hundreds (or thousands) in interest over time. For example, with a debt consolidation loan or an emergency loan, you borrow what you need to pay down all (or most) of your credit card balances. You (or your lender) pay off your creditors, and you make one single payment — typically with a much lower interest rate — to the lender. 

Be sure to consider your situation, and the lender, carefully. You'll want to know you're getting the best rate and terms at a monthly payment that you can afford to pay each month. Comparison shop for rates to get the best offer. Read all the loan documentation before you sign, and watch for red flags like hidden monthly fees. 

6. Make your money earn money.

Your emergency fund should be earning interest at all times, not just holding space in your bank account. Make sure you stash your cash in the right place. 

One of the best ways to do this is by using a high-yield savings account, which pays higher interest than a standard checking account. Keep in mind, to open a high-yield savings account, you’ll often have to start with a large opening deposit. In the beginning, it may make sense to open a simple interest-bearing savings account. Once your emergency savings grow, you can graduate to a savings account that yields a higher return.

Other options like money market accounts, mutual funds, or short-term certificates of deposits may offer higher interest. But you may face withdrawal limits or penalties if you need to withdraw early due to unexpected emergencies. 

The Bottom Line 

Remember, it takes time to build your safety net, and no action is too small. Take time to reflect on your savings goals, set reasonable deadlines, make early payments when possible, make adjustments when life throws curveballs, and celebrate your progress along the way.

And if you find yourself in a sticky situation without (or without enough) emergency funds, there's still solutions out there. A personal loan, for example, may be able to help provide the funds you need with terms you can afford.

You May Also Like

Related Resource Center
Soft inquiries won’t impact your credit scores, and hard inquiries can hurt your scores slightly. Here's what you need to know.
Oct 9, 2023
6 min read
woman on mobile phone image
Having a money plan in place before you turn in your resignation can make the transition smoother. Learn ways to prepare your finances before you go.
Sep 4, 2023
5 min read
Young man relaxing in an orange hammock by a misty lake holding a cup of coffee, looking at laptop on his lap.
Take control of your money and personal wellbeing with tips to recognize burnout and restore your physical, financial, and emotional health.
Aug 7, 2023
6 min read
Woman in pink blazer sitting on ground with laptop in lap next to young girl looking at documents
With six in 10 U.S. consumers living paycheck to paycheck, could budgeting, saving, debt management, or side income be the antidote?
Jul 25, 2023
5 min read
Paycheck to Paycheck
Your credit score plays a role in nearly every financial move you make. Having a great credit score can save you hundreds (or thousands) of dollars a year through lower interest rates on your credit card accounts, personal loans, moving loans, car loans, or mortgage.
Jul 9, 2023
4 min read
Man in denim button up holding a phone, sitting at table smiling
Related Impact
From groceries and diapers to Halloween costumes for pets, nearly 60% of American consumers prefer to shop online for everyday items that make life more convenient, comfortable, and enjoyable. And with rising prices showing no signs of stopping anytime soon, we’re pleased to introduce StackitTM from LendingClub Bank—a new browser extension that automatically finds and rewards eligible members with coupons and cash back for extra savings at more than 15,000 favorite online retailers.
Nov 13, 2022
2 min read
blog header stackit 765x430 v1-1
Even in today’s low-yield, high-inflation environment, it’s essential to keep a certain amount of money in an easy-to-access checking or savings account for things like daily household and emergency expenses, or to meet short-term financial goals.
Oct 2, 2022
5 min read
LendingClub Rewards Checking Nationally Certified as Trusted, Afforda
Since 2007, LendingClub has been on a mission to deliver a world-class experience to all our members. This month we took a moment to reflect on the more than four million members who have chosen LendingClub as their partner to help them reach their financial goals.
Apr 19, 2022
2 min read
Illustration of large number 4 and letter M made up of colorful, tiny illustrations of ethnically diverse people
In March 2022, we hosted our first quarterly webinar where we celebrated our one-year anniversary as a digital marketplace bank. 
Mar 6, 2022
less than a minute read
LendingClub completed the acquisition of Radius Bank in February 2021. At that time, in addition to the direct-to-consumer deposit business, we inherited a fintech partner program, and several lending businesses. As we reach the one-year anniversary of the acquisition, and in conjunction with the conclusion of a strategic review of our business operations, we have made the decision to discontinue certain businesses that don’t fit our mission.  
Jan 2, 2022
2 min read
Man in blue button up shirt and glasses smiling
Related FAQ's
We offer several ways for you to make your monthly auto loan payment, so you can choose the method that works best for you. A statement will be mailed to you every month that shows the payment amount and due date.
Nov 29, 2023
less than a minute read
LendingClub provides a year-end statement that summarizes your account activity, including how much interest you’ve earned and information regarding Notes tied to loans that have been charged off.
Jun 7, 2023
less than a minute read
Applying for a lending product is fast, easy, and confidential.
Jun 7, 2023
less than a minute read
Adding creditors to your balance transfer loan is easy.
Jun 7, 2023
3 min read
To qualify for a lending product with LendingClub Bank, you must...
Jun 7, 2023
less than a minute read
Related Glossary
{noun} A type of credit that allows the borrower to make charges and payments against a set borrowing limit, paying interest only on outstanding balances.
Sep 6, 2023
4 min read
{noun} The total annual cost to borrow money, including fees, expressed as a percentage.
Mar 21, 2023
3 min read
{noun} The amount of unpaid interest that has accumulated as of a specific date, either on a loan or an interest-bearing account or investment. 
Mar 21, 2023
4 min read
A debt that is written off as a loss because the financial institution or creditor believes it is no longer collectible due to a substantial period of nonpayment.
Feb 7, 2023
3 min read
{noun} An interest rate that remains the same for a set time, usually for the life of the loan.
Feb 4, 2023
3 min read

LendingClub Bank and its affiliates (collectively, "LendingClub") do not offer legal, financial, or other professional advice. The content on this page is for informational or advertising purposes only and is not a substitute for individualized professional advice. LendingClub is not affiliated with or making any representation as to the company(ies), services, and/or products referenced. LendingClub is not responsible for the content of third-party website(s), and links to those sites should not be viewed as an endorsement. By clicking links to third-party website(s), users are leaving LendingClub’s website. LendingClub does not represent any third party, including any website user, who enters into a transaction as a result of visiting a third-party website. Privacy and security policies of third-party websites may differ from those of the LendingClub website.

Savings are not guaranteed and depend upon various factors, including but not limited to interest rates, fees, and loan term length.

A representative example of payment terms for a Personal Loan is as follows: a borrower receives a loan of $19,584 for a term of 36 months, with an interest rate of 10.29% and a 6.00% origination fee of $1,190 for an APR of 14.60%. In this example, the borrower will receive $18,663 and will make 36 monthly payments of $643. Loan amounts range from $1,000 to $40,000 and loan term lengths range from 24 months to 60 months. Some amounts, rates, and term lengths may be unavailable in certain states.

For Personal Loans, APR ranges from 9.57% to 35.99% and origination fee ranges from 3.00% to 8.00% of the loan amount. APRs and origination fees are determined at the time of application. Lowest APR is available to borrowers with excellent credit. Advertised rates and fees are valid as of July 11, 2024 and are subject to change without notice.

Checking a rate through us generates a soft credit inquiry on a person’s credit report, which is visible only to that person. A hard credit inquiry, which is visible to that person and others, and which may affect that person’s credit score, only appears on the person’s credit report if and when a loan is issued to the person. Credit eligibility is not guaranteed. APR and other credit terms depend upon credit score and other key financing characteristics, including but not limited to the amount financed, loan term length, and credit usage and history.  

Unless otherwise specified, all credit and deposit products are provided by LendingClub Bank, N.A., Member FDIC, Equal Housing Lender (“LendingClub Bank”), a wholly-owned subsidiary of LendingClub Corporation, NMLS ID 167439. Credit products are subject to credit approval and may be subject to sufficient investor commitment. ​Deposit accounts are subject to approval. Only deposit products are FDIC insured.

“LendingClub” and the “LC” symbol are trademarks of LendingClub Bank.

© 2024 LendingClub Bank. All rights reserved.