{"id":1028143,"date":"2026-08-27T21:11:24","date_gmt":"2026-08-27T21:11:24","guid":{"rendered":"https:\/\/www.europesays.com\/us\/1028143\/"},"modified":"2026-08-27T21:11:24","modified_gmt":"2026-08-27T21:11:24","slug":"how-to-build-an-emergency-fund-when-you-live-paycheck-to-paycheck","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/1028143\/","title":{"rendered":"How To Build an Emergency Fund When You Live Paycheck to Paycheck"},"content":{"rendered":"<p>An <a href=\"https:\/\/www.cnbc.com\/select\/what-is-an-emergency-fund\/\" rel=\"nofollow noopener\" target=\"_blank\">emergency fund<\/a> is a critical part of any financial plan. Budgets and savings goals fall by the wayside if you don&#8217;t have money set aside for an unexpected expense, whether it&#8217;s a surprise car repair, a doctor&#8217;s bill or sudden unemployment.<\/p>\n<p>According to a recent <a href=\"https:\/\/www.surveymonkey.com\/curiosity\/cnbc-money-survey-affordability-july-2026\/\" target=\"_blank\" rel=\"nofollow noopener\">CNBC and SurveyMonkey Quarterly Money Survey<\/a>, 63% of Americans say they are living paycheck to paycheck. Half of those surveyed said just a one-week delay in pay would cause a major financial hardship.<\/p>\n<p>Creating a safety net can seem impossible when you&#8217;re barely able to cover your expenses, but that&#8217;s when you need one the most. The key to building an emergency fund when you&#8217;re living paycheck to paycheck is starting small.<\/p>\n<p>Building an emergency fund on a tight budget<\/p>\n<p>Struggling to pay off debt? Consider enlisting the help of a debt relief company<\/p>\n<p class=\"Disclaimer-styles-select-disclaimerContent--RYK3d\">Offers in this section are from affiliate partners and selected based on a combination of engagement, product relevance, compensation, and consistent availability.<\/p>\n<p><img decoding=\"async\" class=\"PartnerOfferCard-image PartnerOfferCard-outerImage\" src=\"https:\/\/www.europesays.com\/us\/wp-content\/uploads\/2026\/08\/Freedom_debt_relief1.png\" alt=\"\" data-testid=\"partner-offer-card__image--outer\"\/><\/p>\n<p>Freedom Debt Relief has resolved over $20 billion in outstanding debts since 2002. It offers free credit card debt relief consultations.<\/p>\n<p><a id=\"headline0\"\/>What is an emergency fund?<\/p>\n<p>An emergeny fund provides a cushion if you&#8217;re hit with a surprise expense or your usual source of income dries up. Only you can decide what an emergency is, but the account should be for essentials, not maintaining your normal lifestyle. Ask yourself if waiting would cause a practical problem (like not having transportation) or additional financial hardship (like high-interest credit card debt).<\/p>\n<p><strong>Good reasons to use your emergency fund:<\/strong><\/p>\n<ul>\n<li>Rent\/mortgage<\/li>\n<li>Utilities<\/li>\n<li>Groceries<\/li>\n<li>Insurance<\/li>\n<li>Transportation<\/li>\n<li>Minimum debt payments<\/li>\n<li>Medical or childcare costs<\/li>\n<\/ul>\n<p><strong>Usually not expenses for an emergency fund:<\/strong><\/p>\n<ul>\n<li>Vacations<\/li>\n<li>Dining out or shopping<\/li>\n<li>A planned car purchase<\/li>\n<li>A down payment on a house<\/li>\n<\/ul>\n<p>If you have sizeable expenses that are predictable but difficult to budget for, like vet visits or new tires, consider <a href=\"https:\/\/www.cnbc.com\/select\/what-are-sinking-funds\/\" rel=\"nofollow noopener\" target=\"_blank\">a separate sinking fund<\/a>, rather than taking money out of your emergency fund.<\/p>\n<p>Explore savings options to help your money go further.<\/p>\n<p><img decoding=\"async\" class=\"PartnerOfferCard-image PartnerOfferCard-outerImage\" src=\"https:\/\/www.europesays.com\/us\/wp-content\/uploads\/2026\/08\/Amex_Savings_Logo_Update_22022.png\" alt=\"\" data-testid=\"partner-offer-card__image--outer\"\/><\/p>\n<p>Annual Percentage Yield (APY)<\/p>\n<p><a id=\"headline1\"\/>Building your emergency fund, $1 at a time<\/p>\n<p>Experts recommend saving three to six months of essential living expenses to cover housing, food and other essentials if you lose your job or face a major crisis. If your essential expenses are $4,000 per month, your emergency fund would be $12,000 to $24,000. <\/p>\n<p>That can seem like an insurmountable amount. But your first goal is to make sure that one unexpected bill doesn&#8217;t trigger a debt spiral \u2014 even $25 per pay period is a start. Set a goal of $250, and then $500. From there, try to put away one month&#8217;s expenses.<\/p>\n<ul>\n<li>$10 per paycheck =\u00a0about $260\/year<\/li>\n<li>$25 per paycheck =\u00a0about $650\/year<\/li>\n<li>$50 per paycheck =\u00a0about $1,300\/year<\/li>\n<\/ul>\n<p>If you deposit $25 per paycheck into a HYSA earning 4.00% APY, you&#8217;ll have about $663 saved after 12 months, assuming the rate stays constant.<\/p>\n<p>Contributions: $25 \u00d7 26 biweekly paychecks = $650 Interest: about $13 Balance: about $663<\/p>\n<p>If your budget is extremely tight, start with just $5. At this stage, the habit matters more than the dollar amount.<\/p>\n<p><a id=\"headline2\"\/>Make a budget, even if it&#8217;s not perfect<\/p>\n<p>It can feel like money disappears as soon as it comes in, but making a monthly budget can help you see where it&#8217;s really going. A <a href=\"https:\/\/www.cnbc.com\/select\/how-to-create-a-budget-guide\/\" rel=\"nofollow noopener\" target=\"_blank\">back-of-the-envelope approach<\/a> is okay, but there are <a href=\"https:\/\/www.cnbc.com\/select\/mint-budgeting-app-review\/\" rel=\"nofollow noopener\" target=\"_blank\">free budgeting apps<\/a> that help you organize your finances and spot small changes you can make.<\/p>\n<p><a href=\"https:\/\/secure.money.com\/pr\/c45683e02cfe\" rel=\"nofollow noopener\" target=\"_blank\">Rocket Money<\/a> has a free version that tracks spending, subscriptions and bills across all your linked accounts. <a href=\"https:\/\/www.sofi.com\/relay\/\" rel=\"nofollow noopener\" target=\"_blank\">SoFi Relay<\/a> can automatically organize transactions into 15 main categories and 100+ subcategories, while <a href=\"https:\/\/secure.money.com\/pr\/o58b6ffe153d\" rel=\"nofollow noopener\" target=\"_blank\">Goodbudget<\/a> lets you create individual buckets, or savings goals, including for an emergency fund.<\/p>\n<p><a href=\"https:\/\/secure.money.com\/pr\/c45683e02cfe\" rel=\"sponsored nofollow noopener\" target=\"_blank\">Rocket Money<\/a><\/p>\n<ul class=\"Features-styles-select-creditCard--Eb4ur Features-styles-select-featureList--o2tBn\">\n<li class=\"Features-styles-select-featureItem--XBWNy\">Cost\n<p>The basic plan is free. Rocket Money Premium is $7 to $14 a month with a 7-day free trial. Bill negotiation services cost 35% to 60% of the first-year savings, if the negotiation is successful.<\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Standout features\n<p>Easily cancel unwanted subscriptions, track your spending and credit score, automate savings and get help lowering bills. Rocket Money Premium includes additional services like net-worth tracking, credit reports and a subscription cancellation concierge service<\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Security\n<p>Rocket Money accesses transaction data via an encrypted token, uses Plaid API so user credentials are never stored, provides bank-level 256-bit encryption and hosts servers on Amazon Web Services<\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Availability\n<p>Offered online and on both the App Store (for iOS) and on Google Play (for Android)<\/p>\n<\/li>\n<\/ul>\n<p>Pros<\/p>\n<ul>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Allows you to easily view and cancel unwanted subscriptions<\/li>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Offers a free version<\/li>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">A+ from Better Business Bureau<\/li>\n<\/ul>\n<p>Cons<\/p>\n<ul>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Nonrefundable bill negotiation fee can be up to 60% of savings  <\/li>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Premium pricing varies<\/li>\n<\/ul>\n<p><a href=\"https:\/\/www.sofi.com\/relay\/\" rel=\"sponsored nofollow noopener\" target=\"_blank\">SoFi Relay<\/a><\/p>\n<ul class=\"Features-styles-select-creditCard--Eb4ur Features-styles-select-featureList--o2tBn\">\n<li class=\"Features-styles-select-featureItem--XBWNy\">Cost\n<p>SoFi Relay has no fees or costs for use.<\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Standout features\n<p>SoFi Relay allows you to compile into one place information about your assets, liabilities and financial goals.<\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Categorizes your expenses\n<p>Yes, Relay allows you to view charts that categorize credit card and debit card transactions by budgeting categories (such as groceries and utility bills).<\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Links to accounts\n<p>Yes, Relay allows you to link accounts at external institutions to review spending, savings and budgeting across multiple accounts, and based on current month as well as historical trends<\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Availability\n<p>Available on SoFi.com on the web or in the SoFi mobile app.<\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Security features\n<p>User data is stored\u00a0in a location that includes physical security, fire protection, and electronic shielding.<\/p>\n<\/li>\n<\/ul>\n<p>Pros<\/p>\n<ul>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Free to use<\/li>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Users can create charts that categorize spending in different financial categories<\/li>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Provides tips and insights based on your financial information<\/li>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Allows you to compile and view financial info from multiple accounts<\/li>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Automatically updates your connected accounts to always be up-to-date<\/li>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Security features include both physical and electronic protections<\/li>\n<\/ul>\n<p>Cons<\/p>\n<ul>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Uses the VantageScore\u00ae\u00a03.0 credit score, not FICO<\/li>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">May lack some premium features other paid apps provide<\/li>\n<\/ul>\n<p><a href=\"https:\/\/secure.money.com\/pr\/o58b6ffe153d\" rel=\"sponsored nofollow noopener\" target=\"_blank\">Goodbudget<\/a><\/p>\n<ul class=\"Features-styles-select-creditCard--Eb4ur Features-styles-select-featureList--o2tBn\">\n<li class=\"Features-styles-select-featureItem--XBWNy\">Cost\n<p>Free for 20 total envelopes, $10\/month (or $80\/year) for unlimited envelopes<\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Standout features\n<p>Allows couples to track debt and use a digital &#8220;envelope&#8221; system to budget funds<\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Categorizes your expenses\n<p>Yes, but free users must manually input transactions <\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Links to accounts\n<p>No, users must manually input purchases and transactions<\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Availability\n<p>Offered in both the App Store (for iOS) and on Google Play (for Android) and for desktop<\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Security features\n<p>Information is protected using bank-grade 256-bit SSL<\/p>\n<\/li>\n<\/ul>\n<p>Pros<\/p>\n<ul>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Free tier available<\/li>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Can share budget and spending with a partner in real time across multiple devices<\/li>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Digital envelopes help couples and households stay aligned on spending goals<\/li>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Offers money management courses and educational resources<\/li>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Available on iOS, Android and desktop<\/li>\n<\/ul>\n<p>Cons<\/p>\n<ul>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Free tier doesn&#8217;t sync with bank accounts (all transactions must be entered manually)<\/li>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">No bill-paying or investment-tracking features<\/li>\n<\/ul>\n<p><a id=\"headline3\"\/>Open a high-yield savings account<\/p>\n<p>It&#8217;s a smart idea to keep your emergency fund somewhere separate from your everyday checking account so it&#8217;s harder to dip into. Money in a <a href=\"https:\/\/www.cnbc.com\/select\/how-to-use-high-yield-savings-account\/\" rel=\"nofollow noopener\" target=\"_blank\">high-yield savings account<\/a> (HYSA) can earn a healthy return and still be accessible when the time comes. And setting up a regular automatic transfer lets you build your emergency fund without thinking about it.<\/p>\n<p><a href=\"https:\/\/www.happen.com\/personal-banking\/savings\/high-yield-savings\" rel=\"nofollow noopener\" target=\"_blank\">Happen Bank&#8217;s LevelUp Savings<\/a>\u00a0has one of the most robust APYs on the market and is one of the few HYSAs to come with an ATM\/debit card.<\/p>\n<p><a href=\"https:\/\/www.happen.com\/personal-banking\/savings\/high-yield-savings\" rel=\"sponsored nofollow noopener\" target=\"_blank\">Happen Bank LevelUp Savings<\/a><\/p>\n<ul class=\"Features-styles-select-creditCard--Eb4ur Features-styles-select-featureList--o2tBn\">\n<li class=\"Features-styles-select-featureItem--XBWNy\">Annual Percentage Yield (APY)\n<p>4.00% (with monthly deposits of $250 or more), or 3.00%<\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Minimum balance<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Monthly fee<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Maximum transactions<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Excessive transactions fee<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Overdraft fees<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Offer checking account?<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Offer ATM card?<\/li>\n<\/ul>\n<p>Pros<\/p>\n<ul>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Strong APY<\/li>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">No minimum balance required<\/li>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">No monthly fees<\/li>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">Free ATM card and no ATM fees<\/li>\n<\/ul>\n<p>Cons<\/p>\n<ul>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">At least a $250 monthly deposit required to earn the highest APY<\/li>\n<li class=\"ProsAndCons-styles-select-item--ZT8du\">No physical branch locations<\/li>\n<\/ul>\n<p><a id=\"headline4\"\/>Don&#8217;t overlook one-time windfalls<\/p>\n<p>Setting aside money from every check is a key part of building an emergency fund, but we all come into unexpected money from time to time:<\/p>\n<ul>\n<li>Work bonuses<\/li>\n<li>Overtime or additional shifts<\/li>\n<li>Tax refunds<\/li>\n<li>Cash gifts<\/li>\n<li>Selling items you don&#8217;t use anymore<\/li>\n<\/ul>\n<p>Don&#8217;t view these one-time payments as &#8220;free money,&#8221; especially refunds. They can provide an unexpected opportunity to save. Even if you can only devote half of a windfall to your emergency fund, it can make a difference over time.<\/p>\n<p><a id=\"headline5\"\/>Keep your credit card in your wallet<\/p>\n<p>If you can, cover surprise expenses with your emergency fund, not a credit card. An emergency fund is money you&#8217;ve already saved \u2014\u00a0a credit card is borrowed money. The interest on your card can eat up any earnings on your emergency fund.<\/p>\n<p>If your emergency fund earns 4% APY, but your card charges even 10% APR (less than half <a href=\"https:\/\/www.federalreserve.gov\/releases\/g19\/current\/\" target=\"_blank\" rel=\"nofollow noopener\">the national average<\/a>), you&#8217;re losing money by charging that expense and keeping the cash invested.<\/p>\n<p>If your car needed a $1,500 repair:<\/p>\n<ul>\n<li><strong>Paying with an emergency fund:<\/strong> You&#8217;d spend $1,500 and give up roughly $60 in interest you could have earned over a year at 4% APY.<\/li>\n<li><strong>Paying with a credit card:<\/strong> If you&#8217;d charged $1,500 to a credit card with a 10% APR and carried the balance for a year, you&#8217;d pay roughly $150 in interest.<\/li>\n<\/ul>\n<p>If you use savings, your future paychecks aren&#8217;t committed to paying off an old emergency.<\/p>\n<p>That said, you don&#8217;t necessarily want to drain your emergency fund completely. If an expense is large enough that paying cash would leave you with no buffer, it may make sense to use a combination of savings and credit. But paying that card down aggressively is now your top priority.<\/p>\n<p><a id=\"headline6\"\/>Don&#8217;t penny-pinch<\/p>\n<p>No savings strategy will work if you can&#8217;t keep to it. Rather than pinching pennies on every grocery purchase, look at where you have some wiggle room \u2014 streaming services, takeout, rideshares, even insurance or phone plans \u2014 and make a few permanent changes.<br \/><strong><br \/><\/strong>Cutting $75 a month by eliminating one dinner out a month is more meaningful than obsessing over a few cents every time you fill the gas tank.<\/p>\n<p>If your insurance premiums have skyrocketed from last year, start <a href=\"https:\/\/www.cnbc.com\/select\/ways-to-lower-your-car-insurance\/\" rel=\"nofollow noopener\" target=\"_blank\">shopping around for another provider<\/a>. You may be able to save by taking a defensive driving course or <a href=\"https:\/\/www.cnbc.com\/select\/bundling-car-and-renters-insurance-could-save-you-money\/\" rel=\"nofollow noopener\" target=\"_blank\">bundling your auto and home\/renters insurance<\/a> with the same company.<\/p>\n<p>If you have medical bills, you may be able to negotiate a payment plan with the hospital or doctor&#8217;s office.<\/p>\n<p>If you&#8217;re in a debt cycle paying just the minimum on your credit cards, a <a href=\"https:\/\/www.cnbc.com\/select\/best-debt-consolidation-loans\/\" rel=\"nofollow noopener\" target=\"_blank\">debt consolidation loan<\/a> could combine them into one payment with a lower APR, saving you money on interest.<\/p>\n<p>If your credit is spotty, <a href=\"https:\/\/engine.tech\/partner\/cnbc-pl\/loans?preferred_offer_partner=d0e08fc1-c2ff-4dc3-a5af-fda4a1eac92a&amp;tag.pref_partner=upstart\" rel=\"nofollow noopener\" target=\"_blank\">Upstart<\/a> considers factors beyond your credit, including your education history and work experience. Another top lender, <a href=\"https:\/\/secure.money.com\/pr\/d4730166f767\" rel=\"nofollow noopener\" target=\"_blank\">LightStream<\/a>, will beat a competitor&#8217;s qualifying offer by 0.10%.<\/p>\n<p><a href=\"https:\/\/engine.tech\/partner\/cnbc-pl\/loans?preferred_offer_partner=d0e08fc1-c2ff-4dc3-a5af-fda4a1eac92a&amp;tag.pref_partner=upstart\" rel=\"sponsored nofollow noopener\" target=\"_blank\">Upstart Personal Loans<\/a><\/p>\n<ul class=\"Features-styles-select-creditCard--Eb4ur Features-styles-select-featureList--o2tBn\">\n<li class=\"Features-styles-select-featureItem--XBWNy\">Annual percentage rate (APR)<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Loan amounts<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Terms<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Credit needed\n<p>300 (but may also accept applicants with no credit history)<\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Origination fee\n<p>0% to 12% of the target amount<\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Early payoff penalty<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Late fee\n<p>5% of the last amount\u00a0due or $15, whichever is greater<\/p>\n<\/li>\n<\/ul>\n<p><a href=\"https:\/\/secure.money.com\/pr\/d4730166f767\" rel=\"sponsored nofollow noopener\" target=\"_blank\">LightStream Personal Loans<\/a><\/p>\n<ul class=\"Features-styles-select-creditCard--Eb4ur Features-styles-select-featureList--o2tBn\">\n<li class=\"Features-styles-select-featureItem--XBWNy\">Annual Percentage Rate (APR)\n<p>7.24% &#8211; 24.89%* APR with AutoPay<\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Loan purpose\n<p>Debt consolidation, home improvement, auto financing, medical expenses, and others<\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Loan amounts<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Terms\n<p>24 to 144 months* dependent on loan purpose<\/p>\n<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Credit needed<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Origination fee<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Early payoff penalty<\/li>\n<li class=\"Features-styles-select-featureItem--XBWNy\">Late fee<\/li>\n<\/ul>\n<p>Terms apply. *AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Excellent credit required for lowest rate. Rates vary by loan purpose.<\/p>\n<p><a id=\"headline7\"\/>Paying debt vs. building an emergency fund<\/p>\n<p>Of the survey respondents living paycheck to paycheck, 17% say they end up in a deficit each month after paying bills. If you have limited cash, try to establish a small safety net, even a few hundred dollars, then make tackling any high-interest debt the priority.<\/p>\n<ul>\n<li><strong>High-interest debt grows quickly.<\/strong> A $10,000 credit card balance at 25% APR could cost about $2,500 a year in interest if you carried the balance.<\/li>\n<li><strong>Paying down debt provides a guaranteed benefit.<\/strong> Eliminating a 25% credit card balance means avoiding future interest at roughly that rate.<\/li>\n<li><strong>Cash usually earns less.<\/strong> Even a competitive HYSA is unlikely to match a 25% credit card APR.<\/li>\n<li><strong>Reducing debt frees up future cash flow.<\/strong> Once expensive debt is gone, you can redirect those payments toward building a larger emergency fund.<\/li>\n<li><strong>On-time credit card payments can also improve your credit score.<\/strong> While important, a healthy emergency fund won&#8217;t improve your credit.<\/li>\n<\/ul>\n<p>The goal isn&#8217;t to drain your savings to pay off every dollar of debt. Keep enough cash to handle a reasonable emergency, attack expensive debt and then build your emergency fund toward three to six months of essential expenses.<\/p>\n<p>FAQs<\/p>\n<p>How much should I have in my emergency fund?<\/p>\n<p>Many experts suggest a cushion of three to six months&#8217; worth of expenses in an emergency fund.  If you work for yourself or have unpredictable income, you may want to target nine months or even a year. If money is tight, however, focus on the habit of building the fund rather than reaching a dollar amount. Even a few hundred dollars can prevent a surprise expense from becoming a long-term debt.<\/p>\n<p>Where should you keep your emergency fund?<\/p>\n<p>It&#8217;s best to keep your emergency fund distinct from your everyday checking account to avoid confusion or the temptation to spend it on non-essentials. It needs to be fairly liquid, however, so a <a href=\"https:\/\/www.cnbc.com\/select\/high-yield-savings-account-vs-a-cd-whats-the-difference\/\" rel=\"nofollow noopener\" target=\"_blank\">high-yield savings account is a better option<\/a> than a CD.<\/p>\n<p>Should you pay off debt first or build an emergency fund?<\/p>\n<p>If you have no savings at all, consider building a small starter emergency fund first. Once you have enough to handle a modest unexpected expense, prioritize paying down any high-interest debt. After your most expensive debt is eliminated, you can focus on building a larger emergency fund.<\/p>\n<p><a id=\"headline8\"\/>Why trust CNBC Select?<\/p>\n<p>At <a href=\"https:\/\/www.cnbc.com\/select\/\" rel=\"nofollow noopener\" target=\"_blank\">CNBC Select<\/a>, our mission is to deliver high-quality service journalism and comprehensive consumer advice to help readers make informed financial decisions. Every banking article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of banking products.<strong>\u00a0<\/strong>While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content independently of our commercial team and any outside third parties, and we pride ourselves on maintaining high journalistic standards and ethics.<\/p>\n<p><strong>Subscribe to the CNBC Select Newsletter!<\/strong><\/p>\n<p>The CNBC Select Recommends newsletter delivers practical money tips each week along with expert-picked financial product recommendations. Sign up\u00a0<a href=\"https:\/\/www.cnbc.com\/newsletter\/cnbc-select-recommends\/\" rel=\"nofollow noopener\" target=\"_blank\">here<\/a>.<\/p>\n<p><strong>Editorial Note:<\/strong> Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff\u2019s alone, and have not been reviewed, approved or otherwise endorsed by any third party.<\/p>\n","protected":false},"excerpt":{"rendered":"An emergency fund is a critical part of any financial plan. 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