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A hospital bill in the thousands. A vet invoice for hundreds. A car repair for more than you make in a month. When faced with an emergency, it can compound the problem to try to figure out how to pay for the unexpected expenses, on top of an already stressful situation.

If you find yourself questioning, “Should I have an emergency fund?” the answer should be a resounding yes, absolutely! But where to begin? Forty percent of Americans say they are unable to afford even a $400 emergency expense.

Conventional wisdom claims you should have enough money saved in an emergency fund to cover at least three to six months of expenses, depending on your personal financial situation.

But with looming student debt, credit card payments, or other big financial burdens, it can be hard to imagine saving while keeping up with all of your bills and expenses. Emergency funds are great for major unexpected expenses, but preparing for the unexpected still takes time and planning.

Beefing up Your Budget

One of the first ways you can start saving up for an emergency fund is to evaluate your current spending habits and create a budget, if you don’t already have one. Take a look at where there is fat to trim, meaning extra expenses you can minimize or eliminate.

Start with a simple spreadsheet, which should help you break down your spending to see your total income, plus what you spend on necessities like rent, loan payments and groceries, discretionary spending like shopping or entertainment, and long-term goals, including emergency fund savings or retirement.

For a two-income household, you could aim to have three months of expenses in your basic emergency fund, with six months for a one-income household.

In a recent survey, 67% of millennials report having a savings goal and sticking with it every month, or most months. Your overall savings goal might actually include more than just saving for an emergency fund.

One common tactic for an easy budget to stick to is to put 20% of your take-home income toward financial goals, such as savings, and then make part of that just for your emergency fund.

You might want to look at your current bills and deadlines and see what you can adjust to make the most sense with your paydays. If you get paid every two weeks, but all of your bills are due at the end of the month, maybe you find you are dipping into those savings to pay everything on time.

You could try spreading out your bills throughout the month or grouped closer to your paychecks, so you can better budget your money throughout the year. Everybody’s financial situation is different, so figure out what works for you—and stick with it.

Having an emergency fund means you’ll be better prepared to cover any urgent, unplanned financial crises, like a high medical bill or costly car repair, without ruining your normal budgeted living expenses. With money set aside, you’ll be able to stress less and avoid more costly solutions like credit cards or personal loans to fund any emergencies.

However, one possible disadvantage to trying to build up your emergency fund is that you might feel like that money should be going toward paying off debt, like student loans or credit cards, before storing away funds in savings. But it’s important to know good debt from bad in this case.

A mortgage or student loan is generally considered good debt, while a high-interest credit card can be worse for your overall credit score and financial health. If you are weighing paying off debt versus building up your emergency fund, you might consider this order to figure out your top priorities:

•   Make sure you have enough money in the bank to pay any recurring bills.
•   Build a safety net equal to one month of your basic expenses
•   Match any contributions your employer makes for retirement contributions.
•   Pay off bad debt, like high-interest credit cards.
•   Build up your emergency fund.

Once you have three to six months’ worth of expenses saved up for your emergency fund, you can refocus your budget on other long-term goals.

Putting Savings on Auto Drive

If you already use direct deposit, you’ve already got a possible solution to help you fund an emergency reserve. You can set up a recurring transfer with your bank, or split your direct deposit into a checking and a savings account, in order to make savings automatic.

If you don’t notice the money sitting in your account in the first place, it might be less tempting to spend it or move it back out of savings.

So how much can you afford to automatically transfer? The Consumer Federation of America says that an emergency savings fund should consist of at least $500 . They recommend using a savings account that you do not have easy access to, perhaps at a different bank than your current home bank.

You can kick-start your emergency fund by using a cash windfall like a tax refund, work bonus, or birthday check.

You could aim first to get to $500, then $1,000, then one month of essential living expenses, and work your way up from there.

You probably aren’t going to generate three or six months worth of extra money all at once.

Automating your savings might help, whether you choose to have a certain amount from your paycheck transferred into a separate savings account, or set up recurring transfers from checking to savings with your bank.

Then, when you do reach a comfortable number in your emergency fund, you can redirect those automated savings toward other financial goals like paying off debt or funding retirement.

Saving Smarter, Not Harder

So, if you’re determined to start saving more for an emergency fund, you might want to explore exactly what kind of savings account you want to keep your money in.

Certain accounts can earn you significantly more money based on the amount of interest. This could help your emergency fund grow even faster while rewarding you for saving money rather than spending it.

In fact, a SoFi Checking and Savings® account has no account fees. Plus, as a SoFi member, you’ll also receive other benefits to help you figure out your finances, like career coaching, mobile transfers, financial advisors, and community events.

We work hard to charge zero account fees. With that in mind, our fee structure is subject to change at any time.

Before you start saving up for an emergency fund, consider what kind of account you want to keep that money in. It can be helpful to have easy access to cash, in case you are ever faced with a financial emergency.

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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

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