How To Build Your Financial Lifeline And Keep It For A Lifetime

Don't have an emergency fund? Here's what it is, and how you can get there.

By Bryna Howes


Don't have an emergency fund? Here's what it is, and how you can get there.

By Bryna Howes

Whether it’s because of, oh, Mercury retrograde, or just life in general, there’s one thing we can all agree on: sometimes things go horribly wrong. And those moments can take us by surprise. Such surprise, it seems, that about 37 per cent of Australians would be unable to handle the major unexpected expenses that could come along with these moments, according to a new report from the Commonwealth Bank.

If this sounds familiar – or even if it doesn’t – it could pay (literally) to ensure you’re planning properly. This means knowing what an emergency fund should look like, setting your savings goal, and taking steps to ensure you’ll meet this goal and lose that “37 per cent” label for good.

What Does An Emergency Fund Look Like?

How much do you get paid each month, after tax? Take that amount and triple it. Put simply, that’s the amount you should have saved for emergencies: three months’ salary. For many of us, that number is daunting. But probably not as daunting as, say, having emergency wisdom tooth removal and paying the bill on your credit card. Or losing your job and having trouble finding another one. Or having to take your dog to the vet because it ate something it shouldn’t have.


How Can I Build Mine?

Excited to get started? Check out these tips and tricks to being ready for the unexpected.

  1. Automate the process.

There are some who say it takes 21 days to form a habit. Whether that’s true or not, you can use the concept to set up a 21-day savings challenge for yourself. Most banks allow you to set up an automatic transfer from one account to the other. First, what you want to do is set up a separate savings account. Then, you’ll set up an automatic transfer. The transfer will deduct an amount from your savings account, every day, for 21 days. You can start small; perhaps just $1 a day. By the end of the 21 days, you’ll have a small amount of savings and you’ll have formed a habit. From there, you could up the amount or you could change the automatic transfer from daily to weekly or monthly. The point is just to get started, form the habit, and set out on your journey.

  1. Get creative.

Whether you’re starting from scratch or you’ve already started growing your emergency fund, you’re probably wondering: how can I speed this process up? One thing you can consider is getting creative about making some extra money, whether through a side hustle or similar. There are plenty of ways to get started. One of the first things that many savvy savers do is go through their house/wardrobe and uncover items they no longer use/need. Then, they sell those items, usually through a site such as Gumtree or Facebook Marketplace. Every dollar earned goes straight into the emergency fund. If you want to take it to the next level, you could consider putting your skills to good use. Have a knack for drawing? Check out sites such as Fiverr, where your skill is in high demand. Know how to write the perfect resume? Hit up Gumtree, help a stranger out, and earn some money. The point is to do some creative thinking and figure out what you can get paid for. Then, get out there and get to work. Your emergency fund will be filling up in no time.

  1. Open a Goal Tracker account.

If you love a little motivational boost, you should consider setting up a Goal Saver account with Commonwealth Bank and using the Goal Tracker feature within the CommBank app. It quite literally lives up to its name by helping you track your emergency savings goal, simply and easily. Let’s say it’s the 1st of January and you want to save $1,000 by December 31 that year. You’ll input your goal amount and due date into the Goal Tracker. Then, the tracker will tell you exactly how much you’d need to save each week and month to reach your goal. You can then set it up to automatically transfer that amount every week or month, on a schedule. Here’s the cherry on top: If you miss a week or two, the Goal Tracker will help get you back on track. You can either top up the amount you missed or you can set up a new regular transfer. Best of all: you’ll receive bonus interest on your account, as long as you meet all the requirements.

What Constitutes An Emergency?

Of course, what constitutes an emergency will look differently to everyone. But the gist is that it’s an unexpected event. Something you can’t really plan for. You know something will happen at some point – because life happens – but you don’t know what it will be and you don’t know when. A broken down car, urgent surgery, a leak in the roof – these are the type of things you won’t see coming and therefore can only plan for by way of emergency savings. A trip to Bali? A new sofa? These are things that won’t pop up suddenly and you can plan for separately. In other words: not an emergency.

How Do I Stay On Top Of My Fund?

It’s really important you keep one thing front of mind: your emergency fund is for emergencies! It seems so obvious, but it’s oh-so-easy to forget and dip into your fund because you’ve got another fancy dinner out or you want a quick weekend break by the beach with your friends. First you skim a little off the top, then a little more, then you’re back to square one. So, once you’ve made a plan to build and grow your emergency fund, stick to it like white on rice. Don’t stray from the track. There’s a light at the end of the tunnel… and it includes champagne.

What Happens When I Reach My Goal?

First, you pop a bottle of champagne (that you’ve bought with your spending money, naturally). Then, you celebrate. Then, you take a deep breath and bring yourself back down to earth. Now that you have that three months’ worth of money saved, you don’t need to further contribute to your emergency savings fund (unless you want to). You can set up a new savings goal and work on that, since you’ve now formed a great habit. But there are two things to keep in mind:

  1. Make sure you’re continuing to earn interest on your emergency fund.
  2. Make sure that if you do have an emergency and you have to use your funds, you restart your savings habit and get the account back to that three months’ worth of savings.

We can’t be prepared for everything. That’s kind of what makes life fun. But we can aim to be as prepared as possible for those not-so-great life events.