5 tips to help you save for your emergency fund

Estimated reading time
  6 min

Learn how to

• Create a meaningful budget
• Set some money goals
• Open a dedicated emergency fund account
• Automate your savings to watch your money grow
• Make the most of compound interest

No matter the situation, having an emergency or rainy-day fund on standby can come in handy when you least expect it. 

Realistically, how you use your emergency money depends on your personal situation. Unplanned medical bill? You’ve got the emergency funds to cover it. Moving out of home and need an emergency buffer? Your rainy day savings can pay for that.

But how much should you have in an emergency fund? There’s not really a universal number to work towards because everyone’s financial circumstances are different. As a starting point, you can aim for between three to six months’ worth of expenses, which should cover rent or loan repayments, bills, essentials and so on.

We know that saving for that much money might feel out of reach given, well, everything right now. That’s why we’re going to share five simple tips to help you save for your emergency fund. Let’s dive right in.

1. Create a budget

When you’ve got a budget, saving for your emergency fund is a whole lot easier. You’ll get a snapshot of your income and expenses, plus you can work out where you can trim your spending and put that money towards your savings.

Plus, budgets are a money-management game changer. They can make sure you’ve got enough cash to cover your essential expenses while also having some left over for your emergency fund. 

Want to start budgeting? Then use our handy budgeting tool – simply punch in a few bits and bobs, and we’ll take care of the rest for you.

2. Set a savings goal

Having a clear savings goal can help you visualise what the end game will be like and can help you stay on track with your savings. But you can’t just make any old goal – your savings goal should be SMART:

• Specific: Write it down and stick it up on a wall (or your fridge). 
• Measurable: Track your progress as you go.
• Achievable: Try to challenge yourself, but don’t push yourself too far. 
• Realistic: Consider your current situation and keep it realistic. 
• Timely: Set a deadline. 

When it comes to the amount to save for, aiming for three to six months of expenses is a good starting point. You can start off with a small goal too, like saving $3k or $5k, if you feel overwhelmed with meeting your financial commitments and paying for daily essentials. But if you have a specific figure in mind, like $10k, then go for it! 

If you need some help bringing your SMART goals to live, then our savings goal calculator can help you map everything out.

3. Have a dedicated emergency account

Open a savings account that’s dedicated to your emergency fund, so you won’t feel the temptation to dip into the savings you’ve worked so hard to build.

You can also give this account a nickname to help you stay on track with your savings or as a reminder of what the money is for, like ‘Just in case’, ‘Emergency – don’t touch!’ or whatever your specific goal is.

So which savings account should you open? You can opt for a savings account with high interest rates if you want to top up your fund and have immediate access to your money. 

4. Automate your savings

Take the guesswork out of growing your savings by automating them. All you need to do is set up a regular amount you want to transfer and the frequency (like $10 every week or $5 each day), then watch your savings bloom over time without thinking twice. You can set as much or as little as you like – do what’s best for your financial situation and specific goal.

5. Embrace compound interest

Want to turbocharge your emergency savings? Then making the most of compound interest is the way to go. Simply put, compound interest is when you earn interest on your interest. This means that you’re earning interest on your initial deposit plus any interest that you earn, which can create a snowball effect.

Ask your bank about their high-interest or compound interest savings account options, so you can decide which one is right for you. It’s also important to check if these accounts come with conditions that you’ll need to meet to get the high interest, like depositing a certain amount each month or not withdrawing money from the account.
 

  Bonus tip: Don’t forget to reward yourself for all your hard work!

Saving for your emergency fund doesn’t have to be just budgeting, saving and automating – you can give yourself a little treat to celebrate your work and keep you motivated.

Incentivisation is when we attach a reward to a behaviour or action that we do so we can stay motivated as we work towards a specific goal. It’s also when we give ourselves a penalty for failing to do a certain action or behaviour.

When it comes to growing your emergency fund, giving yourself a little reward can be a great incentive to keep saving. For example, you might treat yourself to a nice brunch if you reach a milestone on your savings journey. Or if you saved a certain amount that month, then you can visit the new museum exhibition that you’ve been wanting to go to.

If you decide to treat yourself along the way, don’t undo all your hard work by splurging on a pig purchase for the sake of it. Make your rewards meaningful and you’ll enjoy them a whole lot more (and commit to your savings goal too!).

Read more about bouncing back after redundancy