Build an Emergency Fund Saving

Do You Need to Separate Your Savings?

Written by Rebecca Lake

Everyone needs an emergency fund to cover any financial blips that pop up on your radar but you don’t have to limit yourself to just one. Splitting up your emergency savings into short-term and long-term accounts is a smart way to prepare for the unexpected. If you’re not convinced that you need separate accounts, here’s a look at how it can work to your advantage:

Benefits of a short-term emergency fund


A short-term emergency fund is a smaller savings account that’s designed to be used when you need to cover something that’s relatively inexpensive, like a new set of tires or a leaky faucet. This is money that you can get to quickly if something unexpected comes up and it should be enough to tide you over until you can tap your long-term savings if need be.

The amount of money you keep in a short-term emergency fund is really up to you. For example, if you’re single, have a steady income and your expenses are relatively low, you might be comfortable with as little as $1,000. On the other hand, you might feel safer having at least one month of expenses to fall back on if you’re married and have children.

The main point of short-term savings is to keep you from having to turn to credit in a pinch. It’s especially important to have some kind of a cushion if you’re in debt payoff mode so you don’t add to your balances. Once you’ve got your short-term account fully funded, you can then move on to building some cash reserves for bigger emergencies.

Where should keep your short-term savings?

Accessibility is the most important thing to consider when deciding where to keep your short-term emergency fund. Ideally, you should choose a savings vehicle that pays some kind of interest but this doesn’t necessarily need to be your primary goal.

The easiest and most convenient option is to set up a savings or money market account specifically for short-term emergencies and link it to your checking account. That way, you can transfer money back and forth any time and anywhere. You should be able to get an ATM or debit card for either type of account and a money market will also offer check-writing privileges. The more options you have for accessing the money, the better.

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.

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