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Building an emergency fund

There’s nothing like the feeling of knowing you have enough savings set aside to cover your expenses, no matter what life throws at you. Find out ways to help you build a financial safety net.

3 minute read

Most of us will have to navigate through an unexpected financial challenge at some point in our lives. It could be an out-of-the-ordinary expense, such as urgent dental work, car repairs, or replacing a household appliance. Sometimes, it’s the stretch to cover everyday living expenses when paid work is hard to come by.

Not having enough money for an emergency can cause financial stress and impact your overall sense of wellbeing. You can’t predict or control what comes your way, but you can do your best to be prepared.

Start small and build up from there

It doesn't matter how small the amount - every dollar counts. Start building your emergency fund by setting a small achievable savings goal, maybe $500 - $1000, and put this money aside into a separate account. Think of it like running a marathon. Most of us understand we can't go from zero to a 42km start line in a single leap. Saving is similar. 

How to start saving

1. Make the decision to save

The first step to saving money is deciding to save money. Make a commitment and then tell someone you trust who can help you stay on track.

2. Consider setting up a separate savings account

Having money in a separate savings account can make it easier to resist the temptation to spend it, and if you choose an account that earns interest, this means you can grow your savings over time. Look for a savings account that gives you quick and easy access to your money in case of an emergency. Give your new account a name such as 'emergency' so that you're reminded to only dip into it when it's absolutely necessary.

3. Understand your spending

It can be easier to save towards an emergency fund if you understand how you spend your money and find ways to cut back on your expenses. There are apps that can help you to track your expenses. BNZ customers can access their Activity tab within the BNZ app¹, which can track and categorise their spending.

Once you know what and where you spend, you’ll have a clearer idea of how you might be able to save some money. Look for regular expenses that you can cut back on or do away with entirely. Even just changing things up for a few months can give you the chance to save a little more money, a little bit faster.

4. Make savings automatic

Making regular automatic transfers into your emergency savings as soon as you get paid reduces the chances of spending it.

5. Remember why

It can be hard not to think of all the things you could spend your growing savings on. Remember, this money is for emergencies. It’s for peace of mind and to help you stay out of unplanned debt. 

Focus on covering three months of expenses

Long term, the goal could be to have enough savings to cover three months of basic living expenses. Work out what that looks like for you. So, if you need $2,000 to get by each month, your savings goal is $6,000. This will provide you with some additional security if you were to loose your job or if you were sick and unable to work for an extended period of time.

Ultimate goal: save to cover six months of expenses

Once you reach your goal of saving three months’ worth of basic living expenses, give yourself a pat on the back. Then, keep going. Your ultimate goal is six months’ worth of basic living expenses. If your employment isn’t stable, or you earn a variable income, then this goal is especially worth working towards.

Say goodbye to financial fear

The short-term price you pay to build an emergency fund may feel high at times but the sense of security you get when an unexpected expense comes along will be priceless.

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¹The Activity tab in the BNZ app is available with a personal BNZ credit card or transaction account, including joint transaction accounts. Non-personal accounts like family trust or business accounts won’t show in the spend tracker. Internet access required for the BNZ app. Internet banking T&Cs apply. Maintenance sometimes required.

For BNZ Rapid Save, you get one free withdrawal every bank month. After that, they're $3 each. A withdrawal includes transferring money from your Rapid Save account to another of your BNZ accounts, but not transferring money to a BNZ term deposit.

BNZ lending criteria, terms and conditions and fees apply to BNZ products.

This article is solely for information purposes. It’s not financial or other professional advice. For help, please contact BNZ or your professional adviser. No party, including BNZ, is liable for direct or indirect loss or damage resulting from the content of this article.

References to third party websites are provided for your convenience only. BNZ accepts no responsibility for the availability or content of such websites.