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Phones get broken, accidents happen on the road, unforeseen health complications arise, and homes are susceptible to a wide variety of costly malfunctions. In most cases, it’s not a matter of if disaster will strike, it’s a matter of when. Without the proper preparation, these sudden expenses could send you or your loved ones into financial ruin. Having a dedicated emergency fund is a great way to mitigate some of the burdens that come with unexpected financial emergencies.
In a world where living paycheck-to-paycheck is the norm for many, setting aside any amount of money, no matter how small, feels daunting. Disciplining yourself to save incrementally takes time, but it is possible! Knowing how to calculate an emergency fund is essential for setting financial goals. This guide will help you to determine how much you should save and how to start saving.
Before you get started, consider these three questions.
Rent or mortgage, vehicle payments, gas, groceries, applicable utilities, insurance and any other essential cost of living expenses should all be factored into this number. If you want to have enough money set aside to cover these bills for multiple months, take the total monthly expense and multiply it by the number of months you would like to account for in your emergency fund. This will give you an overall goal to strive for.
While many people receive consistent paychecks that do not fluctuate, others are not as fortunate. Not knowing how much money will be in your paycheck or when your next paycheck will come certainly makes saving difficult. If your take-home pay is inconsistent, or you are employed in a seasonal or unstable industry, it might be prudent to save more to account for these instabilities.
The answer to this question is different from person to person. Needs and general expenses will vary. There is no definitive statistic that states, “This is how much you should save a month.” The ultimate goal is to reach a point where three to six months of expenses are covered by your emergency fund. The journey to a healthy savings account is a very personal one, and getting there will not be easy.
The key to a successful emergency fund is creating a manageable strategy.
Setting a goal that is too lofty could be discouraging and detrimental to building healthy saving habits. Rather than looking at the large three- to six-month goal, aim smaller. Author Lysa TerKeurst says, “Big things are built one brick at a time. Victories are achieved one choice at a time. A life well lived is chosen one day at a time.” The moral of the story is to set bite-size goals. First, try saving to ensure that two weeks of expenses are covered. When you achieve that goal, establish another and strive towards it. These smaller bricks will help you build up to the big number in your bank account that you long to see.
Start small. Depositing too large of a sum will add unneeded stress and could cause you to abandon your saving habits before they have been firmly established. Take a good look at your expenses to determine what is essential and what are indulgences that you can live without. Try to find something you can give up and allocate those funds for your emergency savings. This could be as simple as saving $5 every time you get a craving for coffee or fast food. Replace those meal receipts with deposit slips. This does not mean you can’t enjoy eating out for a meal or two; it just means that these meals are not as frequent.
If your employer disperses paychecks via direct deposit and they allow you to divide your paycheck between accounts, consider setting up your direct deposit to disperse some of your check into a separate savings account dedicated to your emergency fund. By removing yourself from the equation, you eliminate the temptation to withhold your emergency fund contribution for frivolous spending. It is best to make sure that this account is not as easy to access as your checking account. The last thing you want to do is rob yourself of your hard work because of its accessibility.
Consider storing your funds in either a high-yield savings account or a money market account. Both offer higher interest rates than a standard savings account. This means your money will be earning more money while it sits in the account, which is a great incentive to leave your funds untouched. The more money in the account, the more you will earn in interest.
As your safety buffer gets bigger, you may be tempted to spend more because you “have” more. The best thing to do is pretend that the money in that emergency account doesn’t exist until a need that requires it arises. Remember, you have financial goals. Do not stop until you achieve them. That does not mean that you should dump every spare penny into savings. There has to be a balance between enjoying life and protecting yourself from potential financial difficulties.
Tax returns, birthday money and unexpected bonuses are welcome financial boosts. This is all extra income that deviates from your normal pay structure. Make a point to save all or most of these funds when you receive them, and you will expedite the time it takes to reach your end goal.
The journey to financial security is a difficult one. It requires discipline and learning to say “no” to some “now” pleasures for the sake of your future protection. Look for ways to reward yourself for successfully achieving savings milestones. Take a moment to celebrate, and then push ahead toward the next one.
It is important to monitor your progress. While some of your account transfers can and should be automated, that is not an excuse for you to slip into autopilot when it comes to your savings. Keep track of your contributions, monitor your emergency fund’s growth, and adjust as needed. If you find yourself in a situation where you can comfortably put more money away, do so until you reach your financial goal. When you have finally reached your desired savings amount, consider shifting your monthly contributions into an investment account to increase your earnings and further secure your financial future.
Plan for your healthy financial future by following these do's and don'ts.
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Get on DemandYou have spent months, possibly years, creating this robust stockpile of cash in preparation for “emergencies.” Dipping into them is something that no one looks forward to. However, it could make all the difference if you find yourself impacted by one of the following emergencies.
There are several things that can fail in a home, and many of them are costly. According to ipropertymanagement.com, common high-end expenses include:
Vehicles incur a lot of wear and tear getting you from Point A to Point B every day. If your vehicle suffers a breakdown, repair costs could add up fast. Below is the average cost for some common car repairs, according to AAA research and analysis.
Having a furry friend in your life that you care for is such a blessing. However, giving them the care they deserve does not come free. In fact, should an emergency arise, a recent report by Money.com shows the bill could be quite costly.
Medical insurance can help with major expenses, but deductibles can still be costly. You might need to borrow from your fund to ensure this initial expense is covered so you or your loved one can get the needed care.
Based on the Clio 2023 Legal Trends Report, the average hourly rate for attorneys in 2023 was $327/hour. Depending on what your situation is, this number can add up quickly.
If someone steals your identity, your cards will likely be canceled, and the restoration process could be a lengthy one. Being able to access your emergency fund during this time can help tide you over until your lines of credit are restored.
In the event of sudden job loss, your emergency fund can help you cover basic living expenses while you search for a new employment opportunity. Remember, the goal should be to have three to six months of expenses in your account so that you are covered if you have to go without income for a short period of time.
Note: Actual costs vary by situation and severity.
Unexpected expenses affect everyone. By disciplining yourself to save incrementally now, you will be better equipped to handle emergencies later. After all, it is better to have an emergency fund and not need it, than to need it and not have it. Practice these steps and start saving today.
Get more from your savings with AAA Banking and its great rates and easy online tools.
This information is being provided for general informational purposes only. The Auto Club Group does not assume any liability in connection with providing this information.
Annual Percentage Rate (APR)
We may change APRs, fees, and other Account terms in the future based on your experience with ACG Card Services and its affiliates as provided under the Cardmember Agreement and applicable law.
1Cash back can be redeemed in the form of a statement credit or ACH deposit ($25 cash back minimum redemption). Cash back is not earned on business related transactions or activities. You may not redeem cash back, and you will immediately lose all of your cash back, if your account is closed to future transactions (including, but not limited to, due to Program misuse, failure to pay, bankruptcy, or death). Cash back will expire at 11:00 p.m. Central Time on the last day of the calendar quarter that is five (5) years from the date on which they are earned. Account must be open and in good standing to earn and redeem rewards and benefits. Upon approval, please refer to your Cardmember Agreement for additional information. Cash back is earned on eligible net purchases. Net purchases are purchases minus credits and returns. Not all transactions are eligible to earn cash back, such as Advances, Balance Transfers, and Convenience Checks and other advance transactions as defined in the Cardmember Agreement, as well as interest charges and fees do not qualify. U.S. Bank cannot control how merchants classify their business or transactions and reserves the right to determine which Purchases will qualify in which category. Earn 2% per dollar for qualifying net purchases made with the card through any participating AAA Club when AAA is the merchant of record, on qualifying net insurance purchases (MCC = 6300) and at eligible retail travel merchants. AAA Clubs located in Northern California, Nevada and Utah are not participating AAA Clubs and purchases made at those clubs will not qualify for 2%. Earn 4% per dollar for qualifying net purchases on AAA purchases, travel and insurance for your first 6 months up to $6,000. After that, earn cash back in the standard 2% category. Foreign Transaction Fee: None.
2 Benefits are subject to terms, conditions, and limitations on the amount of coverage. Travel and Emergency Assistance Services help in coordinating medical, legal and travel services while away from home. Rental Collision Damage Waiver coverage and peace of mind for damage due to collision or theft of most rental cars. Certain terms and conditions apply. Please refer to your Visa Guide to Benefits for details
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This card is issued by U.S. Bank NA dba ACG Card Services, pursuant to a license from Visa USA Inc. Equal Credit Opportunity Lender
†Annual Percentage Rate (APR). Auto Loans. Rates and terms effective as of 3/7/2025. APR is accurate as of 3/7/2025. Advertised rates and terms are subject to change without prior notice. Additional terms and restrictions may apply. Other loan rates available. Subject to borrower qualification. Advertised rate includes a 0.25% discount when you set up automatic payments from any checking or savings account. Rate is variable. Offer valid on personal vehicle loans only. Criteria to receive the stated APR: Loan term 48 months or less new or used, model years 2019 – 2025 with a credit score of 720 or higher based on the Vantage scoring model. Buyer is responsible for all state or local fees. AAA Banking uses a managed credit program, and final APR is dependent on your credit score. An auto loan with an APR of 5.24% for a $20,000 loan at a term of 48 months, your estimated monthly payment would be $463. An auto loan with an APR of 5.49% for a $20,000 loan at a term of 48 months, your estimated payment would be $465. Private party sales will not be financed. Auto loans are offered by Grasshopper Bank, N.A. Member FDIC.
††Annual Percentage Rate (APR). RV Loans. Rates and terms effective as of 3/7/2025. APR is accurate as of 3/7/2025. Advertised rates and terms are subject to change without prior notice. Additional terms and restrictions may apply. Other loan rates available. Subject to borrower qualification. Advertised rate includes a 0.25% discount when you set up automatic payments from any checking or savings account. Rate is variable. Criteria to receive the stated APR : Loan term 48 months or less, $5,000 minimum loan amount, model years 2023-2025, with a credit score of 720 or higher based on the Vantage scoring model. Buyer is responsible for all state or local fees. AAA Banking uses a managed credit program, and final APR is dependent on your credit score. An RV loan with an APR of 7.49% for a $35,000 loan at a term of 48 months, your estimated monthly payment would be $846. An RV loan with an APR of 7.74% for a $35,000 loan at a term of 48 months, your estimated monthly payment would be $850. RV loans are offered by Grasshopper Bank, N.A. Member FDIC.
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The figures entered on the input page of this calculator are for hypothetical purposes only. You should enter figures that are appropriate to your individual situation. The results provided by this calculator are also intended for illustrative purposes only and accuracy is not guaranteed. This calculator is not intended to offer any tax, legal, financial or investment advice and does not assure the availability of or your eligibility for any specific product offered, nor does this calculator predict or guarantee the actual results of any product. The terms and conditions of products offered will differ and may affect the results of the calculator. Please consult with qualified professionals to discuss your situation. The final APR may differ from the APR in the above results due to additional fees that may be applicable.
3Triple Advantage Savings Annual Percentage Yield (APY) is accurate as of 4/1/2025. The minimum amount to open an account is $100.00. Triple Advantage Savings Account Holders can earn the following Annual Percentage Yield (APY): 3.50% APY with Eligible AAA Membership and 3.15% APY without eligible AAA membership.* Deposit products are offered by Grasshopper Bank, N.A. Member FDIC.
4Triple Advantage Savings account holders with a monthly average balance of $25,000.00 or greater receive free outgoing domestic wire transfers. Triple Advantage Savings account holders with a monthly average balance of $24,999.99 or less will be charged a $10 fee for each domestic outgoing wire transfer.
5Triple Advantage Certificate of Deposit (CD) Annual Percentage Yield (APY) is accurate as of 4/14/2025. The minimum deposit to open an account is $500. 4.25% APY applies to a 6-month CD with balances of $500.00 and up. 4.20% APY applies to a 9-month CD with balances of $500.00 and up. 4.10% APY applies to a 12-month CD with balances of $500.00 and up. 3.95% APY applies to an 18-month CD with balances of $500.00 and up. 3.75% APY applies to a 24-month CD with balances of $500.00 and up. 3.50% APY applies to a 36, 48, and 60-month CD with balances of $500.00 and up. CDs are opened and interest begins on the day the funding deposit is received. The interest rate and APY are fixed for the term of the CD. The APY assumes interest remains on deposit until maturity. Withdrawal of interest before maturity will reduce earnings. A penalty may be imposed for early withdrawal. Fees may reduce earnings on the account. Deposit products are offered by Grasshopper Bank, N.A. Member FDIC.
Early Withdrawal Penalties
An early withdrawal penalty will apply if you withdraw funds before the maturity date. For terms of 6 to 12 months, the penalty is 90 days of interest. For terms of 13 to 60 months, the penalty is 180 days of interest. In accordance with Regulation D, a minimum penalty of 7 days’ simple interest will apply to withdrawals made within 6 days of deposit or within 6 days of a previous withdrawal.
6Triple Advantage Checking Annual Percentage Yield (APY) is accurate as of 4/1/2025. The minimum amount to open an account is $100.00. Triple Advantage Checking Account Holders can earn the following Annual Percentage Yield (APY): 1.00% APY with eligible AAA membership and 0.75% APY without eligible AAA membership.* Deposit products are offered by Grasshopper Bank, N.A. Member FDIC.
7Cash Back rewards offer 1.00% cash back on all qualified purchases made by eligible Triple Advantage Checking account holders with an eligible AAA membership.* To qualify for cash back, Triple Advantage Checking account holders must meet all requirements and a transaction must be deemed as a qualified purchase.
Qualified purchases are signature-based purchases made with a AAA Banking debit card from a Triple Advantage Checking Account. To make a signature-based purchase, select “credit” rather than debit at point-of-sale kiosks. The “credit” option is most often pre-selected when making purchases online using a debit card. Online subscription payments may not be considered signature-based purchases. The payment transaction type (signature-based or other) is ultimately decided by the merchant and how the transaction is transmitted to AAA Banking at the time of processing. AAA Banking reserves the right to determine if a transaction was a qualified purchase, and to establish additional types of qualified purchases that could be made available in a variety of ways. Any goods or services purchased with the debit card that are returned or otherwise credited to the account are not qualified purchases. Unlawful purchases and purchases of currency, cash or cash equivalents (including, without limitation, currency from the U.S. Mint, travelers cheques, gift cards, cryptocurrency, casino chips, peer-to-peer payments, prepaid debit cards, account openings, loan payments, or other cash equivalents) made with a debit card are not qualified purchases. Documentation may be required to validate that certain purchases are qualified purchases. If you or AAA Banking closes the account for any reason before the end of the statement cycle, you will forfeit all rewards accrued through your linked debit card during that statement cycle. The AAA Banking Visa® debit card is issued by Grasshopper Bank, N.A. pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa is accepted.
Important Tax Information
The value of this reward may constitute taxable income and may be reported to the Internal Revenue Service as miscellaneous income to the first signer on the account, in the year received, as required by applicable law. Offer is limited to clients who are citizens of the United States that furnish or have a valid Form W-9 on file and the account must not be subject to backup withholding.You may be issued an Internal Revenue Service Form 1099 (or other appropriate form) to you that reflects the value of such reward. Please consult your tax adviser, as AAA Banking does not provide tax advice.
*Eligible AAA Membership Definition: you must be a "Basic," "Plus," or "Premier" member of AAA - The Auto Club Group (ACG). ACG serves households in Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Michigan, Minnesota, Nebraska, New York, North Carolina, North Dakota, South Carolina, Tennessee and Wisconsin. Applicants must be 18+ and a U.S. resident. Other AAA memberships are not eligible.
AAA-Member Verification & Product Eligibility
By applying for a AAA Banking deposit account, you acknowledge and agree that if you select a AAA-member product, your AAA membership status with Auto Club Group (ACG) will be validated at the time of account opening and periodically thereafter. If your AAA membership cannot be validated or your membership status changes, your account may be moved to a non-member product with different terms, including but not limited to a lower Annual Percentage Yield (APY) and the removal of other AAA member-only benefits. If this occurs, you will receive a notification regarding the change in the product and applicable terms. If you believe your AAA Membership status was incorrectly validated or that you have been placed in the incorrect product, please contact us to review and correct your status.
Products are offered by Grasshopper Bank, N.A.. Equal Credit Opportunity Lender.
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