Emergency Fund: Financial Breathing Room When Life Happens
Could an unexpected $800 expense derail your finances?
According to Bankrate’s 2025 Emergency Savings Report, 34% of Gen Z (ages 18–28) report having no emergency savings at all, and another 37% have some savings but not enough to cover three months of expenses (Bennett, 2025). Do not feel judged—life is expensive, and paychecks only go so far. But, as costs continue to rise, it is very important to protect yourself as you enter independent adulthood.
Why Emergency Savings Matter
Emergencies don’t wait until you’re “ready.” A medical bill, job disruption, or car repair can quickly lead to credit card debt or missed payments if you don’t have a financial cushion. An emergency fund serves as your safety net, helping you manage surprises without derailing your progress or relying on high-interest debt. Think of it as a resource that provides you with time and options when life throws a curveball.
A common rule of thumb is to have three to six months' worth of essential living expenses, including rent, utilities, groceries, insurance, and transportation. The ideal amount varies based on your situation. If your income is less predictable or you lack nearby family support, you might need closer to six months or even more to cover your income gaps and ensure peace of mind.
Starting Small is Okay (Progress is Progress)
You don’t need thousands of dollars upfront—actually, that might be an unrealistic goal. What really counts is some kind of consistency. For example, saving $50 every two weeks, with a 2.5% interest rate on your savings, and assuming no emergencies in the next 12 months, you should end up with around $1,300 saved. Doing that for two years—fingers crossed, no emergencies—could bring your total to about $2,660. Combining regular deposits with compounding interest over time helps your money grow.
Where to Keep Your Emergency Fund
An emergency fund should be easy to access but not too easy to spend. Money market savings or high-yield savings accounts, especially through online banks, might be worth exploring given their higher interest rates compared to traditional savings accounts. They also allow relatively quick access to cash, but are not instant like an account linked to a debit card. You may also want your emergency fund to be relatively “risk-free,” so consider only accounts that are FDIC- or NCUA-insured for emergency funds.
Example
Let's return to that surprise $800 expense—call it a car repair.
Without an emergency fund, that expense might be charged to a credit card, racking up interest and causing emotional and financial stress.
With an emergency fund, you can cover the expense, avoid debt, and move forward—no lasting financial damage, even though parting with $800 stings at first.
Same expense, different outcomes.
Conclusion
Building an emergency fund isn’t about having everything figured out—it’s about giving yourself breathing room. Even small savings can lower stress, safeguard your goals, and help you stay in control when life gets unpredictable. Start where you are, stay consistent, and let your safety net grow with you.
Disclaimer: Creek & Lyells Financial Literacy Foundation does not provide financial services, nor does it recommend or advise visitors to open accounts or buy or sell securities. All content on this blog is for educational purposes only. While we strive to provide accurate, relevant, and well-vetted information, visitors should consult a licensed financial professional and carefully evaluate the risks of any financial decision before taking action.