3 Easy Ways to Grow Your Emergency Fund

by Mike on April 11, 2012

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For many people, putting money aside in an emergency fund is no easy task. Whether you are struggling with a low paying job or too much debt to repay, you may feel that every dollar is already accounted for.

However, there are some ways to save that are (nearly) painless. Try some of the following strategies to grow your emergency fund:

    1. Take advantage of direct deposit.
      You probably have your check direct deposited in your checking account every pay period. Instead of the full amount deposited in your checking, go back to the payroll office and fill out a form to have a portion of your money automatically deposited in a high interest savings account. Perhaps you can only have $50 or $100 put in your savings account, but that is a start.If you have 26 paychecks a year and have $100 pulled out every paycheck, you will have $2,600 saved at the end of the year. At the end of two years, you have now saved $5,200. True, you will probably notice the money is not that when you get your first paycheck, but over time, you will adapt to having the lesser amount, and probably faster than you think.


    1. Take advantage of a flexible spending account (FSA).
      An FSA allows you to take money out of your paycheck before taxes to pay for approved medical and child care expenses. My husband’s employer allows us a maximum of $2,500 for approved medical expenses and $5,000 for child care. We use the full $5,000, and since we need to pay for childcare anyway, I use the money I am reimbursed to bulk up our savings account. Another nice bonus is that since the money is deducted pretax, when you pay your income tax in the spring, your income will be reported as less than it actually is thanks to FSA deductions.The tricky part is that you must state how much you want deducted from each check during the yearly enrollment period, and if you overestimate and don’t use all of the money, you lose it. However, in years of using an FSA, I have never lost the money. If this makes you nervous, just underestimate expenses so you know you will use all of the money.


  1. Save your $5 bills.
    If you pay for most of your expenses with cash, save every $5 bill that you receive and set those aside for your savings account. I did this for 3 months last year and ended up with over $300 in $5 bills. This is a nice way to quickly bolster your savings account.

If you are on a tight budget, saving money can be very difficult. However, if you want to get ahead financially, having an emergency fund to use when you run into financial difficulties is a necessity. It’s also smart to put some of your tax returns into your savings account after you efile your taxes.

Using these three strategies, you should be able to bulk up your emergency fund. When you have an emergency fund equal to 3 to 6 months’ living expenses, you will be able to feel financially more secure, and can then use these strategies to pay down debt or invest. The choice is yours.

**Photo by 401K on Flickr**

{ 7 comments… read them below or add one }

1 Guillermo V Pizarro May 9, 2012 at 6:06 pm

I like the third option “Save your $5 bills” is a ingenius way to save money, when I make payments in cash I’ll save every $5 bill I receive, to increase my funds. This is a incredible way to quickly bolster my savings account, I really like this information thanks Melissa for share this.

2 Amanda L Grossman April 22, 2012 at 7:30 pm

Good ideas. For us, we don’t typically carry around cash. But when we do, we save all of our change in a cow “piggy” bank we bought on our honeymoon in Austria. Can’t wait until it fills up!

3 Young Professional Finances April 16, 2012 at 1:03 pm

I used an FSA one year but then ended up leaving my job – and didn’t do anything with that FSA that I think I lost it. Probably just irresponsible on my part but in the future, I think I’d lean towards an HSA instead. Seems to have the same benefits except you get to roll over any money you don’t use (good for irresponsible people like me).

4 101 Centavos April 13, 2012 at 8:17 pm

Heh… used to be that we saved our *one* dollar bill. Inflation is a killer. 🙂
I like our HSA account. Whatever we don’t use for medical, it rolls over into next year.

5 Andi @ MealPlanRescue.com April 12, 2012 at 9:40 pm

FSAs are still a mystery to me, but I really like the idea of deciding on a denomination and just socking that away. Even if you only start with “your change” that can add up quickly.

6 TB at bluecollarworkman April 11, 2012 at 3:52 pm

Dang. Unfortuantely we already do these things! But they’re good advice because they do work. 🙂 Especially the direct deposit one, right into savings so we never see the money at all!

7 John | Married (with Debt) April 11, 2012 at 2:30 pm

Very good ideas. I like the idea of saving just your $5 bills.

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