You know the value of having an emergency fund. That money is put aside into a separate account to help you cover your unexpected costs if they arise. Separate from your savings and checking accounts, this money will help you pay for medical bills, car repairs, or broken appliances.

Having an emergency fund is critical to building a financially sound foundation. Yet, getting to that point of having money in the bank isn’t always easy. How do you get started even when you may be living paycheck-to-paycheck right now?

Setting Fund Goals

Start with creating some emergency fund goals. Many experts recommend creating an initial emergency fund of $1,000. This amount of money may help cover many unexpected costs, such as paying for repairs to your home after a flood and having enough to cover the cost of a hotel. That initial $1,000 is a stepping stone. Try to put money into a separate account for your emergency needs until you reach this point before funding other savings.

Build up more over time. A sudden loss of income could trigger the need to have more significant money available to meet your needs for a longer time. Aim to build up your emergency fund to reach 3 to 6 months’ worth of your income. To do this, determine how much money you make each month. Then multiply that by 3. That’s the basic amount you should aim for in your emergency fund. Most experts recommend putting aside 6 months of earnings to provide better protection. The need to do that may depend on the reliability of your income or the industry in which you work.

Determine how much money you need to put aside. That could be $1,000 initially, but calculate your 3-month and 6-month earnings goals.

Getting Started

Start small and work to build up as you can over time. To get started, track your expenses and create a budget to clearly understand what you’re spending money on. That way, you can find a few areas where you can cut back.

Once you have a budget, look for small places to get funds into your emergency account. Here are some ideas:

• Aim for $5 a day. Find a way to save that amount each day. Doing that for 30 days means you’ll have $150 to start your fund.
• Look for ways to reduce your costs. Could you walk to work instead of driving? Could you reduce how many subscription services you have each month? Put that extra money towards your emergency funding.
• Look at your utilities for ways to reduce what you are paying. Compare providers to find the lowest costs possible.

Starting with these small steps can help you find windows of opportunity that could help you bring financial stability into your life over time.

Building Your Emergency Fund

It’s time to get to work to build up from that initial $1,000 to your 6 months’ worth of income or expenses. How can you do that? Doing it at $5 a day will be challenging, but there may be more extensive and significant changes you can make that could help you.

Set up direct deposit

Make it a point to deposit a certain amount of each paycheck into your savings account. Set this up, so your bank automates the process, eliminating your need to transfer those funds yourself. This way, it becomes more consistent for you. Work to put away 10% of your income each paycheck like this.

Consider taking on more opportunities

Consider working a few extra hours or a second job to pay down your debt and increase your savings. Consider a side gig that may help you to build up your savings faster. If you do this, make sure to put all the extras towards your fund and don’t spend it on other things.

Save unexpected income

If you receive a tax refund or a sizable gift, put it into your savings account. Do the same with any money you receive as a bonus at work. It’s easy to want to spend those funds, but putting them into your emergency fund ultimately helps you to build financial confidence.

Manage your spending

This may be one of the most impactful tools for reducing costs and increasing savings. From dinners out to purchases of items you really do not need, there are often some simple and highly effective steps you can take to improve your spending.

Where Should You Keep It?

Put your emergency fund into a separate savings account at your bank. This way, it can earn you income over time and allow you to build some interest. In a savings account, the money is still relatively accessible, so you can quickly get to it in an emergency. Yet, it’s separate from your checking and routine spending.

You can choose an online bank or a credit union if you like. What’s most important is having a way to get to those funds if an emergency occurs and you need to do so. Look for a savings account with few or no fees to ensure you are not losing money here.