- Take 10% of your annual income. Compare this to 3 months’ living expenses. If you don’t know what your living expenses are, use your Spending Plan worksheet (link to download here) to calculate this.
- Take the bigger number; this is how much you need in your Emergency Fund.
- Open a new savings account and transfer this money from your checking account into it. What? You don’t have that much in your checking account? Oh. Well. That changes things. In that case:
- Open the Savings Account.
- Set up an automatic transfer from checking to this savings account. Every time you get paid, transfer 10% of your gross pay into the savings account. More if you can swing it.
- No need to ever turn the auto-transfer off. Once the emergency fund is there, keep on saving. Just open a second savings account and switch that auto-transfer to the new account to build your savings for bigger things like a trip, new road bike, car, or home.