Life is full of unexpected surprises. Some are good; others are expensive.


A busted water heater can cost as much as $2,000 to replace, for example. A trip to the emergency room may run you $1,000 or more in out-of-pocket expenses. And if you lose your job it could take months to find another, leaving you scrambling to cover rent or mortgage payments, utilities and other bills.

Saving money for unplanned expenses can help you handle financial crises in stride.

Set a savings goal

There’s no magic number to hit with your emergency fund. Instead, your savings goal should reflect your income and financial obligations. The more you’re committed to paying on a monthly basis, the more you may want to save.

One way to set a savings goal is to calculate your fixed expenses — think car payment, housing costs, credit card and student loan bills — and try to stash away enough to cover those for six or more months. You may also want to add a cushion for things such as medical expenses.

Choose a savings account

A good account will add to your savings, rather than subtract from it with fees and penalties. So look for a free account that will offer a good return and provide penalty-free access to the cash when you need it, up to the federal limit of six “convenient” withdrawals a month. A standard savings account will often fit the bill. Money market accounts at institutions such as Mutual 1st Federal Credit Union can also be good if you have a larger amount set aside. That’s because you can earn a higher return than you could with a regular savings account, provided you can meet a relatively high minimum balance requirement, such as $25,000.

Find a savings trick

Setting money aside each month can be hard, especially if it means sacrificing in the short term. One trick to help you reach savings goals is to automate your savings. If your employer provides direct deposit for your paychecks, consider designating a set percentage or dollar amount to go directly into a separate savings account each month.

You can also set up an automatic transfer to move a designated amount from your checking to your savings on a recurring basis.

Adding lump sums of extra income, like tax refunds or a company bonus, can also help you beef up your savings and reach your emergency fund goal more quickly. In some cases, you can even set those funds to go straight to your savings account, so you’re less tempted to spend.

Another savings trick: Round purchases up to the nearest dollar. Putting the excess in your savings account, will allow you earn interest on your spare change.

Setting aside even small amounts regularly will add up and help make saving — and dealing with financial emergencies — seem a little more manageable.

Kelsey Sheehy, NerdWallet

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