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5 tips to build an emergency fund from scratch, even if you don’t have much extra money

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  • Saving three to six month’s worth of expenses in an emergency fund can be a daunting task, especially when you aren’t earning much. 
  • Saving through automatic deposits is a great way to keep your emergency fund growing over time, no matter how much you’re depositing. 
  • To grow savings without taking money from your budget, use cash-back credit cards or bank bonuses to start your emergency fund.  
  • See Business Insider’s picks for the best high-yield savings accounts »

Building an emergency fund is one of the first steps to recession-proofing your finances, and making sure you’ll be able to weather any storm. But it’s not easy, especially when you’re on a tight budget. 

An emergency fund generally consists of three to six months’ worth of expenses. The more, the better — one expert even advises having 12 months of expenses in uncertain economic times like these. Choose the amount you’d like to save, set a goal for yourself, and keep the money in a separate account from your regular checking, preferably a high yield savings account that will grow your savings over time.

Some people have gotten creative, using credit cards or tax refunds to start or pad their emergency fund. Here are several tips to put together your cash buffer, no matter how much you earn. 

1. Automate your savings

Making your savings automatic is critical to building them without thinking. Writer Elizabeth Aldrich built a $20,000 emergency fund in six months, and says that saving was an important part of her method. 

“I set up my checking account to transfer $125 into my savings account every Thursday, right before the weekend, which is usually when I spend the most money,” she writes for Business Insider. She set up the direct deposits to go into a high-yield savings account. 

Then, the money grew in two ways: with her deposit each week, and with the interest her money earned. Even making small automatic deposits each week can add up quickly, and even snowball with interest.

2. Save your tax refund

When she didn’t make enough income to save anything, writer Laura McCamy started her emergency fund with just her tax refund that she was planning to spend. “One year, about 12 years ago, I was due a tax refund of $5,000 from the IRS,” she writes. “Before the money even hit my bank account, I had come up with $15,000 worth of things I wanted to spend it on.”

But then, a friend told her to put it in savings for three months, and see if she still wanted to spend it later. She did it, but after having savings, she didn’t want to spend it. “My tax refund metamorphosed from a fantasy windfall to money that gave me security,” she writes.

3. Use cash-back credit cards

Using credit cards responsibly and getting rewards through cash-back cards can be a great way to build an emergency fund without having to save much of your income. 

Business Insider writer Clint Proctor used cash-back credit cards to build his emergency fund, especially using the sign-up bonuses. “Many of the cash-back cards would offer cash bonuses of $200 or more. And once we’d earned those bonuses, we’d transfer the money directly to our emergency savings account,” Proctor wrote. 

The cards continue to earn money as purchases are made, which can then be saved. Proctor writes that this strategy only works if you’re diligent about paying off your cards — accruing interest on your cards and paying more for purchases could negate any earnings and savings.

4. Live on last month’s paycheck

Financial planner Elaine King was living in New York City on a small salary when she was starting her career, but knew she needed an emergency fund. She cut back her spending by budgeting to spend only the money from the paycheck she already had in her bank account from last month, rather than planning to spend the paycheck she expected to get. 

“I marked the days that the bills were due and set a schedule for shopping. I switched from credit cards to debit cards so I could avoid spending money I did not have,” she wrote. It helped King “avoid overspending while also leaving a cushion.”

5. Use savings account opening bonuses

Writer Zina Kumok used bank sign-up bonuses, generally ranging from $100 to $300, to start her savings when she was making a small salary at a newspaper. 

“I open a bank account, add money to it, switch my direct deposit to that account, and then receive the bonus around 90 days later,” she writes for Business Insider. There are some catches to this, strategy, however, and she writes that anyone wanting to try it needs to be diligent about writing down every account you open, saving a portion of the earnings because they are taxable, and watching out for fees. 

While it’s not the quickest way to build an emergency fund, Kumok says it worked for her when saving her income wasn’t an option. “Within a year, I had saved enough to stash away a respectable emergency fund,” she writes. 

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