When prices keep climbing, one unexpected bill can put extra pressure on your budget. Having emergency savings can help you cover essential, unexpected expenses, like a car repair or medical bill. That way, you can rely less on high-interest debt and protect the savings you’ve already built.
This quick-start guide shows you how to:
- start with what you have today
- build a small financial cushion over time
- protect your long-term financial goals, including retirement savings, from unexpected expenses
You don’t have to do everything at once. One small step can help take the pressure off.
Simple ways to start building a cushion
Set a goal and take one action
Choose a first target, such as $250 or $500, and decide where you’ll keep it, like a separate savings account. Many people start with a small first goal, then build toward covering more essential expenses over time.
Try this: Take one step this month to get started, such as setting up an automatic transfer or moving part of a refund.
The goal is to make saving simple and easy to repeat.
Find money in your current budget
Once you have a goal, look for one expense you could pause, reduce or swap this month. That might be a subscription you don’t use much, one takeout meal you skip or a purchase you make less often. The goal isn’t to rethink your whole budget. It’s to free up one small amount you can move into savings and repeat each month.
Try this: Move one small amount you already spend into savings to get started.
Put extra dollars to work
You can also use unexpected or leftover money to keep building your cushion. If you receive a bonus, financial gift, tax refund or overtime pay, consider setting aside part of it before you spend the rest. You could also move a small leftover amount, like what’s in your checking account the day before payday, into savings.
Try this: Pick a percentage to save the next time extra money comes in.
Use your retirement plan’s resources
Once you understand your monthly budget, log in to your retirement account to see what you’re contributing and explore available planning resources. You can use My Income & Retirement Planner to check your retirement-savings progress and how changing factors like your contribution amount could affect your long-term picture.
How much is enough for an emergency fund?
Generally, experts recommend saving enough to cover 3-6 months of essential costs, such as housing, groceries, utilities and other basics. Many people find it easier to think in stages instead of one big goal:
- Stage 1: $500 to $1,000 as a first milestone
- Stage 2: About 1 month of essential expenses
- Stage 3: Working toward 3-6 months of essentials over time
Balancing emergency savings with other priorities
If money already feels tight, it can be hard to know where emergency savings fits. Here’s a simple way to think about it: If your budget feels stretched, start small and stay flexible. Even $10 or $25 at a time can help you begin building a cushion. What works may look different from month to month.
You can also talk with a Retirement Specialist or financial professional about balancing emergency savings with your overall plan.
The goal isn’t perfection. It’s progress.
A small cushion, one step at a time
An emergency fund can give you more flexibility to cover surprises. It can help you rely less on high-interest debt, avoid dipping into retirement savings and stay focused on your long-term goals.
Choose one idea above and try it this month.