emergency-fundsIf you had a $500 emergency, would you be able to cover the bill? If you answered no, you’re not alone. In fact, the average American couldn’t afford a sudden $500 bill.

    What is the solution? An emergency fund.

    But here’s the catch: If you’re rich, you probably don’t need an emergency fund, and if you’re not, creating one can be tough. Here’s how to set aside money for a rainy day, even if you’re on a budget.

    The vast majority of Americans are probably able to save $1 a day without much financial hardship. It might not seem like much, but even this simple step leaves you with $365 by the end of the year. If you frequently use cash, adding your daily change to the mix can easily put you at $1.50 a day, or $547.5 a year. Create your own personal tip jar and add a little bit each day. Here are some additional tips for building an emergency fund on a tight budget. 

    Make It Automatic

    Good habits work because they make doing the right thing nearly automatic. But, they aren’t always easy to keep. Automatic savings apps like Acorns and Qapital allow you to take the pain out of saving by making it effortless. These apps offer multiple ways to save automatically. You can specify a specific amount to save each week, or have all of your transactions rounded up.

    I’ve been using Qapital for the past month, and I really like it. It rounds up my purchases, which really does make saving feel effortless. Unlike normal bank accounts, you won’t earn any interest, but I think the automatic savings are worth it. Acorns, on the other hand, doesn’t just round up your money into a savings account—it automatically invests the money. While that makes your money vulnerable to a stock market dip, it also offers you extra growth potential.

    Get Frugal

    Creating a savings account on a budget means every purchase matters. Use GasBuddy or GasGuru to find the cheapest local gas. Consider getting a credit card with cash back rewards, or a cash back signup bonus. Be sure to use your grocery store’s loyalty card to save money on purchases. Sell items you don’t need. You’ll soon find you didn’t miss those items anyway. Sure, each of these steps might only save you anywhere between 1% and 5%, but if you’re spending thousands of dollars a year on purchases, it really adds up.

    Save Your Tax Refund

    The average American tax refund is over $2000. Put this money to good use by adding it to your emergency fund. Even if your refund is lower, this is a good opportunity to put a chunk of change towards your goals. Tax season is a good time to get in financial order, so seize this chance–your wallet will thank you.

    Prioritize Other Spending

    Articles about saving money often warn against purchases like expensive coffee. It’s the classic “be frugal” example. These articles note that if you’re spending $4 a day on Starbucks, that’s $120 per month and $1440 per year. And it’s true, these are huge expenses, especially given how easy it is to make your own coffee. But I don’t think it’s necessarily right to tell you to quit drinking Starbucks—instead, the right advice is to really consider what brings value to your life. Whether it’s coffee, magazine subscriptions, or delivery food, ask yourself if what you’re buying is truly worth it. If working at a café makes you more productive or happier, it might be worth the money. If you’re just doing it out of habit, it might not be. I started making coffee at home and was really surprised. Not only was the coffee just as good, I actually felt better knowing I was saving money.

    The good news is that you don’t have to go all or nothing. Sometimes I buy Starbucks and sometimes I don’t. But, if I’m tempted to splurge on something I really don’t need, and I don’t give in, I’ll add the money to my savings.

    Track Your Spending

    The best way to save money is to understand where it’s going. Like a leaky pipe, people often aren’t aware where they’re wasting money. Apps like Mint allow you to track your spending. They analyze your purchases by category so it’s easy to compare, say, your restaurant costs to groceries.

    Find a Side Gig

    If you’re still having trouble adding cash to an emergency fund, consider side jobs or alternate ways of earning cash. Whether it is driving for Uber or Lyft, tutoring, babysitting, or another side hustle altogether, doing something part-time can be a good way to really boost your emergency fund.

    It’s Not Easy, That’s Why It’s Important

    If you’re having trouble saving, don’t despair. It’s not easy, but that’s why it is so important. Without an emergency fund, an unexpected circumstance can lead to long-term financial problems. You owe it to yourself to create a buffer of stability.

    What strategies are you using to create an emergency fund? Let us know in the comments!