Month: August 2022

Saving for a Rainy Day: Your Emergency Fund

person walking down a darkened city street with an umbrella in the rainThough we cannot accurately predict the future in detail, we can anticipate that there will be events in our lives that will be challenging. The loss of a job, home repairs such as a leaky roof or the need to replace a furnace, major car repair and medical bills are just a few examples of the financial dilemmas that families sometimes face.

In the paper Financially Fragile Households: Evidence and Implications, authors Lusardi, Schneider and Tufano* reported that almost half of American households stated that they would be unlikely to be able to come up with $2000 within 30 days. It can be very stressful to find ourselves without the funds to take care of our families’ needs. Using credit cards or taking out a loan may make the situation worse by adding high interest rate charges to the initial debt.

Wouldn’t it be great to reduce your family’s chances of being overwhelmed when similar situations occur? Having money in reserve allows us to be more control and provides more options in difficult circumstances. You can be better prepared to handle some of life’s challenging circumstances in the future by taking steps now to start or increase your emergency savings fund.

An emergency fund is money that you set aside in a readily accessible account specifically for unexpected events. It is an essential part of your financial plan. How much money will you need to put away? This will depend on your unique circumstances, but striving for at least six month’s worth of basic living expenses is a common goal.

An individual who is self-employed or has an irregular income may want to set aside more over time. Basic living expenses typically include such things as a rent or mortgage payment, utilities, food, car payments, gasoline and oil, insurance, child or elder care and other debt payments. However, if that goal seems overwhelming, it may be helpful to focus first on securing one month’s worth of expenses and as that amount is reached, go on to work towards a second month’s worth and so forth. Some people may find putting a tax refund towards an emergency fund as a good way to increase an emergency fund. Setting up automatic deposits is another way to make this process easy.

What is an emergency when it comes to your personal finances? Merriam-Webster defines an emergency as “1) an unforeseen emergency fund checklist combination of circumstances or the resulting state that calls for immediate action and 2) an urgent need for assistance or relief.” This means that a great deal on a high-definition television or bargain price for a vacation by cruise ship are not likely to qualify in most situations. However, it is appropriate to use these funds when faced with circumstances such as paying a deductible to repair a roof damaged by a tree in a storm. Keep in mind that an emergency situation is really more about necessities rather than wants. Additional accounts for other family goals can be set up once the emergency fund is fully established.

Where should you keep your emergency fund? Keep in mind that you may need to access this money quickly so it needs held in an account which can be easily converted to cash.

Another important consideration is safety. The purpose of an emergency fund is to be more like insurance rather that an investment where you may choose to take some risk to achieve a higher return. It is also a good idea to confirm that such funds are federally insured through the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). As it is important that these funds be available when needed, these monies need to be in accounts with little or no risk of loss.

Starting or increasing an emergency fund provides you with a cash cushion that can help make your financial future more secure.

Use the form to the right to help you determine how much you would want to have in an emergency fund. Consider your unique circumstances and plans for the future. For example, if you are self-employed or you are expecting a baby, it would be wise to set aside a larger amount. Make adjustments to the amount to reflect your desire to work toward greater financial security.

* Lusardi, Annamaria, Daniel Schneider, and Peter Tufano. “Financially Fragile Households: Evidence and Implications.” Brookings Papers on Economic

Saving for a Rainy Day: Your Emergency Fund by Faye Griffiths-Smith, Associate Extension Educator, Family Economics and Resource Management, UConn Extension, 305 Skiff Street, North Haven, CT 06473. For more information, contact her at: or 203.407.3160.

The University of Connecticut is an equal opportunity employer and program provider.

Your Emergency Fund: Getting Started

piggy bank with loose change all around itHave you ever been taken by surprise by an unexpected expense such as a car or home repair, a refrigerator that needs to be replaced immediately, or school expenses? Sometimes we need to act quickly so that we can get to work, keep a small problem from getting bigger, or make it possible for a child to participate in school activities. According to a recent Federal Reserve Report 40% of U.S. households indicated that they could not cover an unexpected $400 expense. Not having enough money to deal with unexpected expenses can be very stressful, but you can take action now to improve that situation over time. Starting an emergency fund is a great step toward increasing your family’s financial stability. A small amount of money saved regularly does add up. Saving $10 each week for a year (52 weeks) is $520.

Potential Benefits of an Emergency Fund

  • You may have more control over your finances.
  • You may have more options when making financial decisions.
  • It may reduce or eliminate the need for a loan or being charged for interest. It may help you improve your credit history.
  • You can provide a great example for the next generation. You may feel less stressed.
  • You may experience more peace of mind.

16 Ways to Save Money for an Emergency Fund

  • Set a goal. Be specific about what you want and when you want it to happen. Estimate how much you will need. Put it in writing.
  • Set up direct deposit. In addition to having money directed to your checking account, you can also check with your employer about also having a portion of your paycheck go directly to your savings account.
  • Save your tax refund.If you expect a refund, direct some of it to your savings account by submitting IRS Form
  • Pay yourself first. Make saving a priority among your
  • Develop a spending plan. You can use a budget sheet, an online form, or a financial It will help in making decisions about how to spend your money.
  • Work as a team. Discuss your savings goals as a family or household. Identify ways to save together.
  • Use a spending tracker. List everything you purchase and every bill you pay. Keep track for at least one week—even better would be one or more months. It will increase your awareness of each expense and opportunities to save money.
  • Review your spending. Look closely at each expense item. Is it still important to you? Are there free or lower cost ways to satisfy that need or want? Try to be open to other options.
  • Try a “no-spend” month. This is when you commit to spend money only on basic living expenses such as the rent or mortgage payment, utilities, groceries, car payment, and other obligations.
  • Make a savings “thermometer”. Put the amount of money you need to reach your goal at the Then add amounts at the halfway point and other amounts in between. Post it where you can see it regularly and update it.
  • Save loose change. Small amounts of money saved regularly do add up.
  • Comparison shop. Check out alternate products, services, and Call your current providers and ask about options for saving money.
  • Challenge yourself. Make a specific commitment to save. You might decide to make all food at home for the month, wait three days before making a spending decision to make a wise choice, or use cash only for face-to-face purchases.
  • Develop a spending plan. You can use a budget sheet, an online form, or a financial app. It will help in making decisions about how to spend your money.
  • Take the Connecticut Saves Pledge. Visit to set a goal for saving and receive helpful information for you to move closer to achieving it! You can also text CTSaves to 877877 to pledge to save.
  • Take a financial education class. Sign up for a financial literacy workshop such as those provided by UConn Extension Financial Education Program. See for more information.

UConn Extension Financial Education Program. For more information, call 203.407.3160 or write