Saving & Budgeting

How to build an emergency fund

Rainy day savings provide shelter from life’s storms. Read on for 6 tips to building an emergency savings fund.

Emergencies are unexpected and inconvenient–and nearly always expensive. Suddenly, you may have to cover unplanned costs–a broken leg, a broken water pipe, late-hour car repair or last-minute airline tickets for a family emergency. And if you lose your job, how long can you and your family stay in your home?

An emergency savings fund will help you cover unbudgeted surprises that life throws your way. This savings account is about more than just money. For most people, knowing that they have some cushion in the bank relieves much of the stress of any potential emergencies.

Here are the who, what, when, where, and why’s of setting aside money to cover emergencies, as well as the golden question of how much.


1. Who needs an emergency fund?

That’s simple–everyone. These dedicated savings accounts are especially important for people who have only one income source or are the sole breadwinner of the family, as well as those who have known health issues or are self-employed.

Did you know? A 2018 survey from found that just 29% of Americans had enough emergency savings to cover six or more months of expenses, and only 39% could pay for an unexpected $1,000 emergency expense using savings. Unfortunately, 25% of all people aged 18 to 53 have no savings at all.


2. What is the purpose of an emergency fund?

An emergency fund will help you pay for unexpected expenses like vet bills, car repairs, unforeseen home repair costs and other surprises. This type of savings is especially important if you are facing a job layoff or serious health issues that will reduce your income for a while. An emergency fund should be off-limits except in cases of a true emergency.


3. When should this fund be used?

It can be difficult to discipline yourself to leave the emergency fund for emergencies only. To help, write down the types of situations that would qualify for a withdrawal from the emergency fund, and those that do not, and then stick to your rules. Avoid the temptation to use the money to pay down credit cards or buy that new TV on sale.


4. Where should you set up your emergency savings account?

Set aside a separate savings account to be used just for emergency expenses. Keeping it separate lets you clearly know how much you have and removes any temptation to use it for non-emergency purposes. This cash needs to be readily accessible, and not invested in a Certificate Account or other long-term investment, but be sure to put it in an account that will earn interest. Global savings accounts are NCUA insured and earn competitive interest rates, which gives you more money to use for emergencies if the time comes.

Did you know? Global offers two types of savings accounts; Share Savings and Premium Savings. Both offer a secure way to save money for emergency situations. Dividends are calculated daily and paid quarterly, which helps your money grow over time. You can easily set up automatic deposit into the account, and you may access your money anytime you need it. Both your money and Global will be there when you need it.


5. Why do you need an emergency fund?

This account helps you avoid going into debt when you have unexpected expenses. And, simply knowing that you have the money to cover it gives you less to worry about and allows you to focus on taking care of your emergency instead of wondering how you’re going to pay for it. It also helps you avoid making bad decisions in an emergency—like covering a roof leak with a tarp instead of having the roof repaired or replaced.


6. How much should you have?

While it depends on your situation, most experts recommend you have three to six months’ worth of living expenses available for emergencies. When calculating this amount, count all monthly expenses, including rent and mortgage, utilities, car and homeowners’ insurance, health care, loan payments and food.

If three to six months’ worth sounds overwhelming, don’t get discouraged. Anything helps. Set goals; start with just $500 and add a bit every month. Consider using automatic deposits into your emergency fund to make saving even easier.

Start saving now!

There’s an old saying, ‘the best way to get out of debt is to avoid adding to it along the way.’ Visit any Global branch today or call the Member Service Center at 800-525-9094 to set up a Share Savings or Premium Savings to hold your emergency savings. We’re here for you.

Know that the best emergency fund is the one that never has to get used.

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