You might be lucky enough to be financially stable and just realizing you should shift some money into an account for emergencies or start setting aside a few hundred dollars a month for an emergency account.

For a lot of folks, getting started with an emergency savings account can be a lot more difficult. It’s just another to try to balance with your monthly expenses, paying off debt, and any other number of financial obligations.

If 2020/21 has taught us anything though, it’s that they need to be a priority.

And the nice thing is, the journey of a thousand miles starts with one step. So literally anything you can do to get started is better than nothing. I’m going to start with some suggestions for you to consider starting small and working our way out from there.

Install Dobot

Dobot is just flipping amazing and I am so excited some bank bought it and made it free again.

Even if you’re not struggling financially, Dobot is a great financial tool to use.

You connect Dobot with your bank account and it has an algorithm that analyzes your income and spending and siphons out small amounts a few times a month. If it analyzes it wrong, it will pay any fees you incur.

I’ve used this app when I had steady income from a long term job and also during the ups and downs of freelancing – including during some very down times. It never overdrafted me. The vast majority of the time, I didn’t even notice the money it was taking because it would take only a few dollars here and there.

The money goes into a savings account for you in the app. Whenever you want, you can transfer the money either back into your checking account or for our purposes here, this can be your started emergency savings.

Out of sight, out of mind can be a really useful mental push when trying to start your emergency savings.

Open a Health Savings Account (HSA)

If you qualify for one, health savings accounts can be a really great first tier emergency savings. This post I wrote outlines the requirements to qualify.

The reason they are such a powerhouse initial emergency savings account is because of the tax benefits.

Whatever you contribute to your health savings account can be deducted from your gross income at tax time. So if you’re able to put away $1,000 and made $40,000 this year, you only get taxed on $39,000.

The money you put in a health savings account can be used for qualified health expenses. There are probably more of these than you suspect – including over-the-counter medicines, feminine hygiene products, contact lenses, etc.

Ideally, you can cash flow these items and not have to touch your health savings account. Then you just keep a file to hold on to the receipts and at any time in the future, you can deduct that amount from your HAS to use for anything.

If you can’t cash flow the items, you still get the tax benefits from the account and can use that money to pay medical expenses.

If you find you’re doing really well over time, you can also use an HSA as an investment account and harness the compounding interest power of the stock market.

Opening an Emergency Savings Account

If you’re able to max out your HSA, don’t have enough medical expenses to feel good about the money you put in an HSA being accessible enough, or would prefer to use your HSA specifically to deal with high medical costs – let’s look at a more traditional emergency savings account.

I’m doubling down on out of sight, out of mind here and saying that I think, if possible, it’s best to put your emergency savings in an account at a different bank than your checking account.

This post outlines key things you can look for when evaluating savings accounts. For an emergency savings account, I think you want one that can transfer money out quick enough to pay off your credit card bill that month.

And if you are a total cash user, I take back what I said about using a different bank and suggest setting up your savings account in the same bank as your checking account because many banks will let you link them so that in an emergency, if you needed to withdraw the cash immediately, you could.

 You could also opt for a savings account at a different brick and mortar institution, where you can walk in and withdraw money at the counter.

I would also look for the accounts with the highest interest rates. These are usually online banks. Interest rates vary, but as of March 2021, you’re doing very well if you find one offering in the .40-.50% range.

Setup Automatic Transfers to Your Emergency Savings

If you work a regular job with a steady paycheck, you can probably talk to your HR department about splitting your paycheck. Figure out how much you can spare and have it automatically deposited into your emergency savings.

If that’s not possible, you can setup an autodraft from your checking into your savings account scheduled for the day after your paycheck usually hits.

If you don’t get paid on a regular schedule, you can consider what you think you can usually do and setup a once a month transfer. Even if it’s only $10 or $25, it’s still worth doing. Hopefully over time you can creep it up. If you ever need to, you can also stop a transfer the month.

Find Side Hustles That Can Help You Reach Your Goal

Maybe you were one of the lucky ones I mentioned above who were able to just divert a portion of their paycheck into savings until they reached their goal.

For the rest of us, finding a side hustle to fund our emergency funds can be a useful step. Something as small and easy as signing up for UserTesting and putting anything earned there into the emergency savings fund can add up over time.

A nice thing about this is that you can set your emergency savings goal and know that you can stop with the extra hustle when you hit it. It may take a few years, but three years of bartending on the weekends can be worth it for the security you get of knowing you can handle an emergency.