How to Start Building Your Emergency Fund in 2025

The short answer? By putting one financial foot in front of the other.

Welcome to the year of “Oh, shit, maybe I should cancel that Orangetheory membership and cut back on the Seamless.”

Thank you, economic turmoil, for waking us up to the fact that maybe—just maybe—it’s worth taking a more intentional look at the way we’re spending, how much we’re saving, and if we’re investing properly.

I say this with only an almost-undetectable tinge of sarcasm, since in some ways, I do think this wake-up call helped a lot of us course-correct.

Today, I want to take a look at how to consider your financial life holistically: a sanity check, if you will, that the way your money breaks down makes sense. Not emotional sense, but mathematical sense. Because sure, you may have found a way to justify the $800 in DoorDash monthly purchases (“I work hard!”), but if that represents 25% of your total take-home pay… you have to wonder, does this make sense arithmetically?

One of the burning questions that initially drove my interest in personal finance in 2018 was this:

How much should I be saving and investing every month?

The short, simple, and frustrating answer is, As much as you possibly can.

But how do you balance “as much as possible” with “not wanting to be a hermit”? You turn to the numbers.

Let’s start big-picture. What percentage of your income should you be aiming to save and invest every month, broadly speaking? The minimum, in my mind, (take a deep breath) is around 25%.

While this isn’t going to be realistic for many (especially those with high student loan debt or low incomes), it’s more realistic than I think most moderate to high earners realize. There’s a clear and distinct difference between, “I can’t save 20% of my income because I have to pay $1,000 toward my grad school loans every month,” and, “I can’t save 20% of my income because I’m living beyond my means.”

This distinction makes people understandably squeamish, because it can feel like there’s judgment attached to the qualification of “beyond my means.” And if you grew up in a house where you watched the adults casually and consistently overextend themselves financially, it’s even more likely that this pattern will appear in your own spending habits.

The good news is, you are in control now. Every swipe, tap, or insertion of the Sapphire card is wholly and inescapably yours. You can break the pattern, if there is one.

For most, though, it probably isn’t a convoluted, emotional relationship with money—it’s just simple awareness, or as JL Collins calls it, “benign neglect.”

But jumping into individual investing before you have an emergency fund is like entering a BMX race before you take off the training wheels for the first time (though the enthusiasm is admirable). The emergency fund is the basis for financial security.

“Setting boundaries” becomes “building a launchpad”

So while 25% is the number we’ll start with, I want you to consider what 30% (or maybe even 40%) would look like. Let’s expand the consideration of saving from denying yourself joy in the present to prioritizing your future desires.

The human brain is pretty bad at this. It takes work and awareness. We’ve been evolutionarily conditioned to place more value on the reward right in front of us than the delayed gratification of a (sometimes much bigger) reward 5 or 10 years from now. Because hey, in the age of wooly mammoths and a life expectancy of 20, why the hell would I bet my cave paintings on compound interest when the fancy fur pelt is right in front of me?

Let’s evolve past caveman personal finance policy.

We aren’t denying ourselves the fur pelt now. We’re casting a vote for a future version of ourselves who has grown wealthy enough to buy the entire herd of sheep.

And because I’m running out of prehistoric analogies, let’s shift to the numbers.

An example

25% is not meant to intimidate or agitate you, just to provide a target. Let’s use an example.

If my salary is $60,000 and my company offers a 6% dollar-for-dollar 401(k) match, the first thing I should do (assuming I’m debt-free; if you’re not debt-free, consider jumping to this post about how much your life costs that digs into debt strategy) is set my 401(k) contribution at 6%. This is the preemptive strike—it seizes the free money being offered to you and casts a vote for the gray-haired, shuffleboard-playing future version of you.

Your first 6% toward your goal of 25% is knocked out. And really, since that decision means your company is now contributing 6% as well, it’s a little like you’re at 12%. But we aren’t stopping there.

Next, let’s circle back to layer one: Savings.

When it comes to simple savings, your emergency fund is technically your #1 priority, so shoveling as much money into your emergency fund as possible is the blunt-force approach.

And how much should be in your emergency fund? I know we all say it’s 3-6 months of expenses, but unfortunately, most of us don’t know exactly how much that is (again, I direct you to the article about determining how much your life costs).

If you spend like the average person does, yours is probably around $20,000.

Whether seeing “$20,000” either made you sigh in relief or draw a sharp inhale tells you exactly what your next step is:

If you’re nowhere near $20,000 in savings, let’s forget about investing for a second: The first and only priority (beyond the 401(k) match) is hitting this number.

Where to build your emergency fund if you’re just starting

My favorite place to build an emergency fund is the Betterment Cash Reserve account, which currently offers around 4% APY.

In our $60,000/year example, the take-home pay after tax is probably about $4,000/month after taxes, and $3,700/month after you take out the 6% 401(k) contribution we decided on earlier.

So there you are, with your $3,700/mo.—and 6% of your 25% already checked off.

If you’re building an emergency fund, shoot for depositing the remaining 19% right into the emergency fund account of your choosing. That’s $700 per month, or $350 per paycheck. Automate it so you don’t have the chance every month to change your mind.

I know it might feel like a lot—because realistically, it is.

But this means that 31% of your income is going toward Future You instead of Present You (your 6% contribution, your employer’s 6% contribution, and your 19% contribution to your emergency fund).

Your first $100,000

Even if you never got a raise or increased your contributions, you’d be closing in on around $100,000 invested in about five years. And by saving and investing 25% of your income, you’re on track to go from a $0 net worth to total financial freedom in approximately 26 years.

In this example, a paycheck that typically nets $2,000 per pay period will leave you with about $1,500 to spend after your saving and investing—but it’ll be money you can spend guilt-free, because you know you’ve already paid the most important person in the equation: Future You.

Of course, these examples become far more eye-widening when you start using larger salaries. The ironic part? It also becomes increasingly easier to achieve—living on 75% of $60,000 is far more difficult than 75% of $100,000. This is why negotiating for a strong salary is arguably the most important part, and why it’s such a critical focus in Chapter 2 of my book Rich Girl Nation, “The Truth About Earning More.”

Once you cross the finish line

After the emergency fund is stocked, it’s time to sit back, feel smug, and celebrate.