Military and Money

Military and money: Simple strategies to build an emergency fund

An emergency fund can help you overcome unexpected financial hurdles, and it’s especially important to be financially prepared when military personnel are deployed. It’s also a financial issue many people need to address: A recent study by the National Bureau of Economic Research found that almost half of Americans would struggle to scrounge up $2,000 for an unexpected expense.

Some military spouses refer to unplanned outlays as Pvt. Murphy showing up every time a spouse is away on a tour of duty: Anything that can go wrong, will go wrong. That’s why an emergency fund is crucial. Here’s how to get started.

Determine how much to set aside

While there is no standard amount that should be socked away in an emergency fund, three to four months of your take-home pay is a good initial goal and will help a household easily cope with large expenses while a spouse is away.


Contribute to the fund and meet your goal

After deciding how much you’ll need for an emergency fund, get started with these strategies:

  • Review your financial situation and determine what is feasible for you to regularly contribute to your emergency fund. Take a closer look at where you’re currently spending money. Are there areas where you could cut back? Track your spending for a month and evaluate. For example, could you eat out a little less and redirect those dollars to your emergency fund?
  • Consider setting a series of goals. That one big lump sum can be overwhelming. Setting stair-step goals (one month of take-home pay, then two months, etc.) will help you see your accomplishments along the way.
  • Develop a plan of action about how you’re going to meet your goal: perhaps a weekly $5 deposit or $50 a paycheck. If your financial situation changes (you get promoted, pay off your car, etc.), revisit this plan of action and make changes as necessary. When developing your plan of action:
    • Use direct deposit to automatically add to your savings regularly. That way, you won’t forget or be tempted to skip a contribution.
    • Make it a competition. Setting up a saving competition with family or friends can help you reach your goals faster. Whoever adds the most to the savings account, or reaches their end goal, wins!
    • Remember your fund when unexpected cash comes in. Along with planned, regular contributions, consider putting part (or all) of that tax refund, work bonus, or gift of cash in your emergency fund, as well.

The more you put toward the emergency fund, the faster it grows and the sooner you’ll have your safety net established, but contribution amounts don’t have to be large. The main goal is establishing a lifelong habit of saving with steady deposits, no matter how small.

Talk to your credit union for help
Check out your financial institution’s savings products to see how they can help you establish an emergency fund. For example, Karen Guy from SAC Federal Credit Union says, “SAC Federal Credit Union offers a 12-month New Saver’s certificate that allows you to make contributions to it in increments of $10; only $20 is required to open it. After that, you can add as much or as little as you can. The nice thing about any certificate is that you’re putting your money to work for you because your balance in the certificate earns dividends. So, in a sense, you’re getting paid to save money.”

Certificates can have early withdrawal fees, which could come into play during a financial emergency. These fees can motivate you to keep your money in place until a real need arises. At SAC, the early withdrawal fee will never be greater than the amount of the dividends you earned, so you would still receive your original balance.

Monitor your success
Once you’ve established a saving plan, monitor your account so you can see it grow. Sign up for monthly email alerts regarding your balance. For example, SAC Federal Credit Union will send you alerts via text or email when a new online statement is available, or when you meet your target balance. These updates can serve as motivation to keep adding to your fund.

Access funds for emergencies only
One final point to remember: Only use the fund for true financial emergencies. If you have non-emergency financial needs (or wants), set up a separate account for them so that you’re not tempted to dip in to emergency fund savings. And if you don’t use the emergency funds during the deployment, the savings can grow into a bigger safety net to support you when something unexpected happens.

How do you plan for unexpected expenses during a deployment? Download your free copy of our latest checklist: 7 financial tips for deployment to prepare for the expected, and the unexpected.

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Author SAC FCU Managing Editor

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