The $20 Emergency Fund


You might think this is too good to be true, but I promise: this is the easiest hack to building a real Emergency Fund on a tight budget.

You can build an Emergency Fund with as little as $20.

When I decimated my Emergency Fund in 2016 and immediately added to my state of financial crisis with an unplanned pregnancy, I knew I had to get my finances in order fast. But how on earth was I going to rebuild my savings while still trying to build my company and buy baby stuff?

Starting is the most important step

When I get anxious emails from people trying to get a handle on their finances, usually it’s equal parts overwhelm and failure. I have nothing saved, how can I possibly get to $X?

Well, you start by opening an account and putting a dollar in it.

If you have $0 saved for retirement, and you wish you had $10,000, you’re not going to get anywhere near that number by staying at $0, but you have a shot if you put $10 away. You have a better chance if you find a way to save $100. And you have a really good chance if you can manage to put $1,000 in a savings account.

Why? Because once you learn how to do something one time, you just have to repeat it. In the above case, once you’ve found a way to save $1,000 you would only have to repeat your behavior nine more times and you’d reach your goal. See? Easy.

Don’t ruin a good thing: compound interest counts

It’s been my experience that money grows well if you just leave it alone. Even at low interest rates. Even with minimal contributions. If you don’t spend it, your bank balance grows.

If you save $20 per week in a savings account earning 1%, at the end of one year, you’ll have $1,045.12

Ok, it’s not glamorous, but it’s not nothing either. Whether you care to admit it or not, every dollar you earn in interest is a dollar you don’t have to work to earn, and that’s awesome. I don’t care if you’re only earning $2 in interest per year – somewhere, someday, that is a small coffee you don’t have to pay for.

Want better returns? EQ Bank consistently offers the highest interest on savings accounts. That’s an excellent rate to help your emergency savings grow!


How to turn $20 into $1,000

When it came to rebuilding my emergency fund while saving for a baby, I found the easiest and most painless way was to set aside $20 per week. It was a ridiculously trivial amount, the cost of a nice lunch during the work week or a good bottle of wine with dinner, neither of which I was partaking in as a pregnant woman. I knew I could afford to tuck away $20 per week while still keeping my primary saving focus on funding my maternity leave.

I could afford $20 per week. In fact, it was so small, I probably wouldn’t even notice it. So I set up an automatic bank transfer from my chequing account to move $20 every Friday to my Emergency Fund savings account.

I’m the first to tell you $20 is a pitiful Emergency Fund. So is $40 and $80 and $100, for that matter. But once I’d been saving for 12 weeks, and my balance tipped towards $250 I couldn’t help but think, “well, that’s enough for a minor unexpected expense.” Thankfully, I didn’t have any emergencies crop up, which meant my account kept growing with my contributions and a little bit of interest every month.

$20 emergency fund

Then I realized something: $25 isn’t that much more than $20.

Painlessly increasing your contributions

For all the times I harp on about The Latte Factor, even I was forced to acknowledge that skipping my Friday Starbucks run would let me increase my contributions to my newly regenerating EF to $25 per week or about $100 per month.

I felt like I was doubling-up on financial security everywhere. Not only did I have a Baby Fund, but I also had the added defense against whatever non-baby related catastrophe could hit me at any moment. (Though I have to say, after the unplanned baby thing I felt there were very few financial surprises I wouldn’t be able to weather with creativity and grace).

I had an emergency fund, and I had built it with only $20 per week. Thanks to the interest and keeping up with my contributions, it hit $1,000 in no time. Furthermore, because $25/week was so easy to save, I knew I could keep going even in my maternity leave.

Finding $20 per week to save

You might think your budget is already airtight and you can’t possibly find another $20 to allocate somewhere knew, but there are ways to finagle this from old and new places if you get creative.

Where to find $20 per week:
• Skip dining out for two lunches or 1 dinner
• Have two fewer beers or 2 fewer glasses of wine every weekend
• Skip your usual taxi or Uber rides and walk or take public transit instead
• Negotiate to lower your monthly insurance premiums or cable costs
• Clip coupons and shop with a list on your next grocery run to reduce your bill
• Get money for completing surveys or surfing the web on sites like Swagbucks
• Earn cash-back on your spending through Rakuten and a cash-back cards like KOHO
• Babysit, dog-walk, or tutor for some extra money on the side

In other words, you no have excuses not to start saving your Starter Emergency Fund. All it takes is $20!

Happy saving!

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15 Comments. Leave new

  • So true! For a while I was only able to save $5 a week of my income. It was deflating, but I made sure to save *something*. And, sure enough, the day came where I had a $600 car expense. Instead of going into more debt, I was able to use my small-yet-mighty savings to cover it.

  • That old saying; “The journey of a thousand miles begins with a single step” is pretty applicable here!

    Great advice for anyone who needs serious help saving. I think most anyone can find ~$100 a month to trim 😉

  • Yesss got to keep it achievable! When I first started getting my finances together and kept hearing this 3-6 months living expenses rule of thumb, I was like LOL who can do that? But using an approach similar to the one in this post, I have been tucking away cash here and there in my EF since I started working after my masters a year ago, and my emergency fund is now about $2000! Wild how those little changes add up before you know it…thanks for keeping it real!

  • 2 less glasses of wine just sounds wrong 😀 (I’m kidding!)

    Everyone (well, most people) starts from zero. Personally, I remember feeling discouraged at first as well, starting an emergency fund from scratch is quite overwhelming. But little by little, money add up eventually 🙂

  • Bridget, I love this! I have read so many PF blogs about saving a lot of money in a short amount of time and for most people it’s just not doable. I have been saving $160 a month in my emergency fund for a few years now and it just passed the $5000 mark. I was lucky not to have any major emergencies in that time, but sometimes slow and steady really does win the race.

  • Yes! It can be so hard to take the first step… but that’s all it takes to kick off and get motivated!

  • I’m using this trick to fund a “Grandkids” account. Right now 4 out of the 5 grandkids are under 3, but when they are older and have opportunities for special events (camps, trips, courses) I would like to have the funds to help them be able to take part, especially if it is something their parents may have trouble affording. I just started putting $10 a pay cheque into an account and it’s already up to $100!

    I love that this account makes me feel like I can be a fairy grandmother! 🙂

  • Good stuff.
    I should open a separate savings account for my emergency fund.
    Rates are so low it hardly seems worth it, but it probably does add up. Thanks for the reminder!

    • Could you try looking into current accounts rather than savings accounts? I’m in the UK so may not exactly the same where you’re from, but my current account (which I use as a savings account) has an interest rate of 4% in which I get paid interest each month 🙂

      – Most tend to come with requirements, for instance I have to deposit £1000 in each month, which I do as soon as I get paid, then I just put about £950 into my normal account where all my bills are paid from 🙂

      Have a look around 🙂

  • After reading this article, I decided to transfer $40 every two weeks to an emergency fund. I depleted my emergency fund recently because of set backs and I hadn’t started to save into it again. The main reason is that the $1000 that I wanted to have is such a big number that it does get overwhelming. So, thank you for this post. It’s a great reminder that you just have to start, even with a small amount. Then, hopefully, over time, you can reach your goal.

  • It’s all about baby steps (pun intended- congratulations on your baby!!) to start saving $20 and building that EF. Hopefully while on maternity leave I will be spending less rather than spending more!

  • Wow!
    This is so elegantly simple!

    Wish I’d known about it years ago.

    I really like how you show that $25 is not much more than $20 and that increasing the deposits will do more good.

    Good stuff here, for shore!

    I’m going to share this one in my next Weekly Fav 5.

  • Spot on. It’s even easier if you have a credit/debit card that makes automatic contributions to your savings, even if it’s just a dollar at a time. This stuff does add up and it won’t happen overnight!

    I personally like to automate my payments from my employer so that a certain amount is deposited directly into my savings, as opposed to my checking. Then, you just have to focus on saving it for emergencies.


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