An emergency fund is one of the most important financial tools you can have. It’s a fund set aside specifically for unexpected expenses, like medical bills, car repairs, or job loss. Having an emergency fund gives you a financial cushion so you don’t have to go into debt or make hard choices when emergencies arise. Here are the steps to build your own emergency fund:

The first step is to determine your goal. A good rule of thumb is to save enough to cover 3 to 6 months of essential expenses like housing, food, and transportation in case you lose your income. If your monthly essential expenses are $3,000, aim for $9,000 to $18,000 in your emergency fund.

Next, make a budget to find money you can allocate to your emergency fund each month. Look for expenses you can reduce or eliminate, like dining out or entertainment. Even saving an extra $200 or $500 a month can help build your fund over time.

Open a separate high-yield savings account for your emergency fund. Keeping it separate from your regular spending account will make you less likely to dip into it for non-essential purposes. Look for an account with a competitive interest rate so your money can grow even as it sits there.

Start setting aside money from each paycheck to automatically transfer to your emergency fund. Most banks allow you to set up automatic recurring transfers. Aim for at least enough to meet your monthly goal, and increase the amount over time as you pay off debt or reduce other expenses.

Review the progress of your emergency fund at least once a quarter. Make adjustments as needed to stay on track to meet your goal. Reward yourself for milestones along the way to stay motivated, but don’t spend from your emergency fund!

Once you reach your goal, you’re not done. Continue adding money to keep up with inflation and ensure you have enough coverage. And if an emergency arises and you do need to spend from your fund, make replenishing it a top priority once you get your finances back on track.

An emergency fund provides essential financial security. Following these steps will put you well on your way to having a solid financial cushion in case of unexpected events. Stay disciplined, start today, and you’ll build a fund that provides peace of mind for years to come.