When planning for the unexpected, building an emergency fund is essential to safeguard against life's uncertainties. Experts generally recommend saving enough to cover three to six months of essential living expenses. This cushion ensures you can manage if something unforeseen occurs, like job loss or health issues.

However, some financial experts suggest that saving more than six months' worth of expenses can offer additional peace of mind. Tanya Taylor, a financial coach, recently shared her personal experience on the Money Glow Up podcast, where she discussed how a serious car accident and unexpected medical costs rapidly depleted her emergency fund.

“Having almost a year’s worth of savings was crucial during my recovery, but even that wasn’t enough when additional unforeseen expenses arose,” Taylor explained in a conversation with Tiffany Aliche on Yahoo Finance’s podcast.

Rebuilding After the Unexpected

After exhausting her emergency savings that were intended to last a year, Taylor faced the challenge of rebuilding her fund. For those starting from scratch, Taylor offers valuable advice on how to begin building a financial safety net.

Start With a Purpose

For many individuals living paycheck to paycheck, the thought of saving for emergencies may feel overwhelming. Taylor suggests that identifying a clear purpose for your savings can provide motivation during the process.

“Start with your ‘why’—why are you building your emergency fund?” Taylor emphasized. “If you don’t have a strong reason, it’s easy to lose sight of the goal.”

Create a Budget

Taylor advises that the first step to building any financial cushion is establishing a budget. Knowing where your money goes each month helps you pinpoint areas where you can allocate funds toward your emergency savings.

“A budget isn’t meant to restrict you; it’s meant to guide you,” Taylor noted, emphasizing that tracking expenses helps reveal hidden opportunities for savings. She encourages small, incremental contributions: “Start small. Even $20 a week adds up, and over time, you can increase the amount as you find more ways to save.”

Set a Savings Goal

To stay focused, Taylor suggests setting a realistic savings goal based on your essential monthly expenses—such as housing, food, and transportation. This will give you a clear target and a plan for reaching it.

Automate Your Savings

One of Taylor’s key strategies is to automate your emergency fund deposits. By setting up automatic transfers to a separate account, ideally a high-yield savings account, you can ensure that savings accumulate over time without the temptation to spend the money.

High-yield savings accounts often provide better interest rates than traditional accounts, helping your savings grow faster. “Inconvenient money gets saved,” says Aliche, the podcast host, underscoring the importance of keeping your emergency savings separate from everyday spending.

Review Your Budget Regularly

Building an emergency fund requires consistent effort, and reviewing your budget regularly is crucial to staying on track. Taylor advises using a budgeting app or spreadsheet and revisiting it frequently to track progress and identify areas for improvement.

“It’s easy to set a budget and forget about it, but you need to revisit it often to ensure you’re sticking to your goals,” Taylor said.

While it might feel like a lot of work, Taylor’s experience shows the importance of being prepared for unexpected challenges. “I thought I was financially prepared, but the reality is that even being well-prepared couldn’t shield me from the challenges I faced after the accident,” she reflected.

In the end, Taylor's message is clear: It’s never a bad idea to save more than you think you’ll need. Financial preparation can provide vital security, even when life throws curveballs.