How to Cover an Emergency Even When You’re Scraping By


If a $400 bill showed up in your mailbox tomorrow, could you cover it with your savings? For 4 in 10 Americans, the answer is no. Instead, they’d have to sell something or borrow money to pay for the unexpected expense.

I can sympathize. Not so long ago, I had a low-paying 9-to-5, $60,000 of student loans to pay off and no safety net. It wasn’t until my dog got sick and required an expensive trip to the vet that I realized just how common emergencies actually are and that the best way to weather them without taking on even more debt is to be prepared.

If you’re in the same boat, take heart. Building a healthy emergency fund isn’t as hard as it sounds, even if you’re living paycheck to paycheck. Here’s how.

1. Open a separate savings account that earns good interest.

Earmarking an account for a specific purpose is the best way to avoid borrowing from one goal to cover gaps in another. So open a separate savings account just for emergencies. If you can, do it at a different bank from where you keep your checking account. That can help keep you from tapping it early when you’re tempted. Look for accounts offering high interest yields of at least 1.5 percent. (Yeah, that’s considered high these days.)

2. Name it.

It sounds cheesy, but nicknaming your account can help create an emotional connection, which encourages you to nurture, not rob, it.

When I was growing up, my grandmother was diagnosed with kidney failure and needed dialysis. She had insurance, but the deductible was high and my grandparents didn’t have a lot of savings. They ultimately worked out a payment plan, but the ordeal put my family through a lot of stress. That’s why, when I started my own emergency fund, I named it “Kidney Fund.” I hope not to need it for that purpose, but it’s a good reminder of why I save.

3. Start small.

Eventually, you’ll want to work up to a balance of three to six months’ worth of basic living expenses (housing and utilities, groceries, insurance, etc.). But that can feeling like an overwhelming goal, especially if you’re starting at $0.

So make your initial target a low, achievable number—like $1,000 (or even $400). Breaking down the savings journey into manageable chunks makes it easier to stay motivated and keep going.

4. Free up extra cash.

Now it’s time to figure out how you’ll fund this account. The best place to start is by trimming your current expenses. Cancel wasted or unused subscriptions, negotiate your bills, cook a few more meals at home or swap one Uber for public transportation. Even small changes can make a big difference over time.

5. Make saving automatic.

Once you’ve found some extra money to save, make it easy on yourself by setting up an automatic transfer directly from your paycheck or checking account to savings. This helps you cement good behaviors without any thought, and ensures you won’t accidentally spend the money before it hits your emergency fund.

6. Funnel “extras” to your savings, too.

If you get cash as a birthday or holiday gift, save some. Got a raise or bonus? Earmark a chunk of that increase to savings, too. Selling clothes or household items you don’t want anymore can also give you more cash for savings. Basically, whenever you get a little extra, funnel it to your safety net.

And get creative. I saved $4,000 in about eight months by paying myself every time I avoided a bad habit, like eating greasy foods or smoking, that I was trying to break.

7. Adjust your target every time you reach it.

Once you hit your first target, stop and savor that moment. Then set your sights on the next goal. After your first $1,000, for example, aim to save one month’s worth of expenses, then go for two. Also remember that you should adjust your fund as your expenses change and your income (hopefully) grows.