Skip to main content
png

FDIC-Insured—Backed by the full faith and credit of the U.S. Government

Close

Before you go

You are leaving Flagstar.com

Continue
Budgeting and Saving

How an emergency fund can change your life

Pop quiz: Out of the blue, something happens, and you need $700 right now. How do you respond?

A. Uh oh. This is not good.
B. I hope my credit card can pay for it.
C. I’ve got it covered.

There’s a big difference between C and the other two choices. It’s the peace of mind that comes from having an emergency fund. It’s not just about the money; it’s about the relief it brings to difficult situations.

Whether it’s an unexpected medical cost, a broken furnace, or your job being downsized, not having enough cash can make things 10 times more stressful. But with an emergency fund, you’ll breathe a little easier, thanks to your financial safety net.

 

Why many of us don’t have an emergency fund

We get it. Saving for emergencies isn’t easy. Here are a few reasons many of us haven’t started one.

  • Our budgets are already stretched thin. In 2023, the average US household brought in some $7,300 a month and spent around $6,400 (Bureau of Labor Statistics), so there’s not much left after the bills are paid.
  • The pressure to spend is everywhere. Social media and targeted ads are constantly pressuring us to buy, buy, buy, and sometimes we do exactly that.
  • Saving feels so meh. When everyone’s talking about stocks, crypto, and passive income, it’s hard to get excited about a savings account. But here’s the thing: Your emergency fund should be easy to access and stable, not prone to the whims of the market. It’s not about getting rich—it’s about being ready for the unexpected.

How much money should you keep in an emergency fund? The rule of thumb is to save enough to cover 3 to 6 months of expenses. Using the average household numbers above, that’s around $20,000 to $40,000 for many of us. To find the right amount for you, consider the specific needs of your household, like the number of people, type of income (regular or sporadic), and your personal comfort level.

Why having an emergency fund matters

When you’ve set money aside for tough times, you’re protecting your wallet and your peace of mind. For example:

  • You can make decisions from a place of choice, not panic.
  • You sleep better knowing you’re prepared.
  • You can focus on handling the emergency instead of worrying about how to pay for it.
  • Your relationships face less strain since money stress often affects the whole family.
  • You can avoid going into debt, which brings its own mental and financial burdens.

How to start your emergency fund (even on a tight budget)

Don’t let perfect be the enemy of good. Start by saving $500 or $1,000, then work your way up to 3 to 6 months of expenses. Even a tiny cushion can make a huge difference in your stress levels when an emergency pops up. Here are a few tips to get started.

  • Find “extra” money to fund your account. Deposit your tax refund or birthday check from Uncle Frank. Look for small ways to cut back on your budget—maybe one less takeout meal per week—and put the difference into your account. If you have a Flagstar checking account, sign up for Round Up with Flagstar®. It’s a service that rounds your purchases up to the next dollar and puts the difference into your Flagstar savings.
  • Consider opening a home equity line of credit. Some homeowners get a HELOC to cover emergencies until they build up enough savings. It’s a second mortgage that you can use as needed and usually has a lower interest rate than most credit cards. To learn more, visit our HELOC page and Home Equity Lending & How it works.

Icon of a bell and exclamation point

Remember:

Your emergency fund helps you prepare for whatever life has in store. Imagine the relief of not having to worry about how you’ll pay for unexpected expenses. That’s the emotional benefit of an emergency fund—and it’s worth every penny.

You may also be interested in:

Yellow Background

Emergency Fund Calculator

How much should you set aside for emergencies?
Image of woman looking at her phone

How to Enroll in eStatements

Switch to electronic statements for a fast and secure way to check your balances.
Parent and child building a snowman
Earn 4.20% APY1 with Flagstar Performance Savings

Grow your money with a great savings rate.

Flagstar Performance Savings

1Annual Percentage Yield (APY) is accurate as of 3/15/2025. Tier 1 $0 – $9,999.99 features an annual percentage yield of 0.10%. Tier 2 $10,000.00 – $24,999.99 features an annual percentage yield of 0.10%. Tier 3 $25,000.00 – $49,999.99 features an annual percentage yield of 4.20%. Tier 4 $50,000.00 – $99,999.99 features an annual percentage yield of 4.20%. Tier 5 $100,000.00 – $499,999.99 features an annual percentage yield of 4.20%. Tier 6 $500,000.00+ features an annual percentage yield of 4.20%. The interest rate(s) and annual percentage yield(s) are variable and may change at any time before or after the account is opened. Initial minimum opening deposit to earn the higher interest rate on the Flagstar Performance Savings account is $25,000 and must be “new money,” which is defined as money that is not currently on deposit in any Flagstar Bank account (except maturing CDs). Additionally, (i) account must be funded within 90 days of the approval date, and (ii) early account closure fee may be imposed for accounts closed within 180 days. A maintenance service charge of $15 will be imposed every statement cycle if the average daily collected balance in the account is less than $10,000. The maintenance service charge will be waived if you are the tax reported owner on this account and you are an owner on a Flagstar personal checking account. Fees may reduce earnings. Personal accounts only. Limited time offer. Area restrictions may apply. If you are a Private Bank client, please contact your Private Client Group to enroll.