Budgeting Saving

5 Painless Ways to Build an Emergency Fund

Written by Rebecca Lake

Beefing up your emergency savings doesn’t mean you have to live on rice and beans for the rest of your life. Cutting out unnecessary expenses is a good first step but there are plenty of other ways to increase your savings that won’t leave you feeling deprived. If you’re ready to jump start your emergency savings without completely overhauling your budget, here are five easy ways to grow your balance:

1. Change your withholding

If you normally get a tax refund back every April that means you’re paying too much in taxes during the year. That’s effectively the equivalent of giving the government an interest-free loan. Adjusting your tax withholding with your employer can put some money back into your paycheck, which you can then funnel into your emergency savings account.

Before you make any changes to your withholding, you need to make sure that you’ll still be covering your tax liability. Otherwise, you could end up owing Uncle Sam big money at tax time. Plugging your income, exemptions, deductions and filing status into the IRS Withholding Calculator can give you an idea of how much you need to have taken out each pay period.

Once you figure out what the appropriate amount is, you’ll just have to fill out a new W-4 with your employer to complete the change. Even if adjusting your withholding only nets you a few extra dollars to save a month, that’s money you’re not having to carve out of your budget to add to your emergency fund.

2. Save your windfalls

Any time you get extra cash that you’re not expecting, you should resist the temptation to spend it and aim to save it instead. That goes for windfalls large and small, whether it’s a $5,000 tax refund, a 5% pay raise or a $20 birthday check from your grandma. If you’re willing to get a little creative, you can even create mini-windfalls of your own without a lot of effort.

For example, let’s say you’ve budgeted $75 for your weekly grocery shopping trip but one week you only spend $72. Since the extra $3 is already accounted for in your budget, you have the option to go ahead and spend it or you could use it add to your emergency fund. If you apply the same rule to all of your monthly expenses you can easily add a dollar here and a dollar there to your savings as long as you stick to your monthly spending plan.

3. Cash in on credit card rewards

Using a rewards credit card to pay for things is a smart move as long as you’re paying the balance off in full each month to avoid interest. Some cards offer points or miles but others offer cash back. That’s basically free money you can use to pad your emergency account.

If you’re shopping around for a cash back card, there are a few things you need to pay attention to. First, there’s the rewards structure itself. Certain cards allow you to earn more cash back when you spend in specific categories while others pay a flat rate on everything you charge. Ideally, you want to pick a card that allows you to maximize the cash back you’re earning based on your spending style.

Next, you need to look at the interest rate and fees. Assuming you don’t plan to carry a balance, the interest rate may not be that important, but you don’t want to choose a card that charges you a high annual fee. If you don’t use it that often, the fee can easily negate any rewards you might be earning.

4. Negotiate lower payments

If you think that all of your monthly bills are set in stone, you may be missing out on opportunities to add to your emergency fund. Taking the time to call up all the companies that you pay money to each month to ask for a better deal is well worth it if it creates some wiggle room in your budget.

For instance, if your account is in good standing and you’ve been a loyal customer for years your credit card company may be willing to cut you a deal on your interest rate. You may also be able to get a concession from your insurance company or utility service providers if you’ve always paid on time.

If you run into someone who’s not willing to budge, that’s a sign that you need to shop around to find a better deal. Changing over your car insurance or cell phone plan takes a little work on your part but it can pay off if the end result means you’re spending less and saving more each month.

5. Switch to a new bank

Banks make money by charging customers fees, which can work against you when you’re trying to save. If you end up getting hit with the occasional overdraft fee or being penalized for failing to maintain a minimum balance that’s less money you have to add to your emergency fund. Moving your accounts to a bank without as much red tape can eliminate the problem.

In terms of being the most fee-friendly, online banks usually have the edge over brick and mortar banks because they have fewer overhead costs to pass on to the customer. The drawback of going online, however, is that there’s no branch to go to when you need one. That can be an issue if you have to make a big cash deposit or you need something that requires a banker’s signature, like applying for a loan or having documents notarized.

Taking the time to compare what’s available can help you find the bank that’s the best fit. Just be sure to review the fee schedule carefully to look for any special requirements or hidden charges that could make the move more expensive.

Final thoughts

Growing your emergency fund doesn’t always require making huge financial sacrifices. Rather than revamping your entire budget, you may be able to bump up your savings just by looking for extra money that’s right under your nose.

About the author

Rebecca Lake

Rebecca Lake is a personal finance writer and blogger specializing in topics related to mortgages, retirement and business credit. Her work has appeared in a variety of outlets around the web, including Smart Asset and Money Crashers. You can find her on Twitter at @seemomwrite or her website, RebeccaLake.net.


  • I am a retired businessman.I am pretty good with finance but it never cease’s to surprise me that I learn from you most of the time. Keep up the good work that you do. Thank you very much. D.R.

  • I Love receiving your emails with your ideas & tips! Ive been implementing them for over a year & I just bought my brand new car last week! Thank You!! Never give up! Bad credit is not a life sentence!

  • I am very appreciative of You guys!! I have a long way to go, but with hardwork & sacrifice, i know in my heart, i will get there. I have to significantly lower the balances on my credit cards & start saving… I get so overwhelmed with this truth because of the status of my current income; However, after reading this and yesterdays message (or the day before) I am truly encouraged that I can make this happen for me & my daughter. You & Your staff are appreciated.

Leave a Comment