3 Ways to Effortlessly Boost Your Emergency Fund

by Christy Bieber | Updated July 17, 2021 - First published on March 2, 2021

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Building up a bigger emergency fund doesn't have to be hard.

Maintaining a hefty emergency fund is one of the keys to financial security. And the continued pandemic-induced uncertainty makes it more important than ever. Unfortunately, it can be a real challenge to save the recommended three to six months of living expenses -- especially when you have other pressing financial obligations.

But the good news is, there are some techniques you can use to effortlessly increase the amount you set aside. In fact, here are three ways you can boost the cash in your rainy-day fund without changing your spending habits. 

1. Deposit cash back rewards into your emergency fund 

There are many great credit cards out there that allow you to earn cash back. And in some cases, you can choose to have that money deposited directly into a savings account. 

Let's say you do all your spending with a credit card that will deposit your cash back into emergency savings. Every routine expenditure becomes a chance to build a bigger emergency fund. You won't have to do anything apart from spending money you would have spent anyway. And each time you swipe your card, the creditor will give you a little bit of cash to help cover surprise expenses in the future.  

If you have a cash back card that provides 2% cash back, your emergency fund will grow by $20 for every $1,000 you spend. Depending on how much you charge, that can really add up. 

2. Divert your raise to building up your fund -- before you get used to the extra money 

When you get a raise, it's tempting to take that extra money and upgrade your lifestyle. But until you've fully funded your emergency fund, you should avoid increasing your spending. 

Instead, as soon as your paycheck comes, put the extra money into your emergency savings.  In most cases, your bank will allow you to automate this process. Your employer may also let you split your paycheck so a portion of the funds can go into savings. 

If you take this approach, you won't miss the money from your check since you never had it in the first place. And if you get a 2% or 3% salary bump and deposit that entire amount into emergency savings, your account should also grow pretty fast. 

3. Use your tax refund

Most Americans receive a tax refund when they file their income tax. In fact, The Ascent's research showed the average refund was $2,881 in 2018. If you get several thousand dollars back in a lump sum from the IRS, you can put that money immediately into your emergency savings.

Since this is a one-off payment and you haven't built your budget around receiving it, you hopefully won't need to use the tax funds for anything else. And putting a few thousand dollars into a high-yield savings account as soon as you receive your refund is one of the fastest and simplest ways to build up your emergency account balance. 

If you employ all three of these techniques, you should be able to save your recommended three to six months of living expenses quicker than you imagined. And without any major changes to your spending habits. Your rainy-day fund will give you the peace of mind that you won't have to struggle to cover unexpected expenses when they inevitably occur.

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