4 ways to rebuild your emergency fund

There may come a time when you have to use the savings in your emergency fund. If that happens, you can be proud that you’ve done what many experts suggest: Put money away to pay for unexpected expenses.

But once your roof is repaired or you’re back at work after a layoff (two common uses for emergency savings), you’ll need to start replenishing those funds. Experts recommend saving between three to six months' worth of expenses.

Revisit your budget

An emergency can upend your budget, so the first place to start is to get your monthly saving and spending habits back on track, according to CNBC. David Wilson, a senior wealth manager at Watts Capital, a financial-advice firm based in New York, says that creating a financial budget of monthly expenses is the first step toward developing an emergency fund. You probably did that the first time you saved for an emergency, and now’s a good time to revisit your plan.

Cut back costs

It’s also important to reduce expenses. As you rebuild your emergency fund, see where you can trim. Policygenius.com advises: “Review your existing income and expenses and look for areas to divert to savings. You may want to reduce or eliminate unnecessary expenses like dining out, going to the movies and subscription services.”

Save tax refunds and other payments

Many people receive cash windfalls throughout the year, such as a tax refund, a work-related bonus or a gift from a loved one. According to the Consumer Financial Protection Bureau, those looking to rebuild their emergency savings should put those extra dollars directly into their emergency account. “There may be certain times during the year when you get an influx of money,” the CFPB writes on its website. “While it’s tempting to spend it, saving all or a portion of that money could help you quickly set up your emergency fund.”

Choose the right type of account

Before you rebuild your fund, it’s a good idea to make sure the account you’re using is the right one for your needs. According to Forbes, there are several types of accounts to choose from, such as high-interest savings accounts or certificates of deposit (CDs). High-interest savings accounts make a lot of sense, says Kevin Payne, a personal finance expert and author of the Forbes article, because they’re easy to open and they usually offer attractive interest rates—better than what you’d find with a checking or money market account.

If you don’t need your money right away, CDs may be an attractive option to help you build your emergency fund, because they can come with potentially higher interest rates, notes Payne.

If you’ve built up an emergency fund before, doing it again shouldn’t be that different, though you may have different financial realities than you did previously. Crunch the numbers to make sure you’re putting enough away, and find the savings account with the best interest rate. Then start saving.