How to Build an Emergency Fund

An easy 8-step process to build an emergency fund

Agatha from The Wealth Tribe
9 min readFeb 27, 2020

Earlier this week, I almost got hit by a car. The strong wind pushed me to the middle of the road. I wish I was joking! If the driver was on his phone or distracted, I’d be dead or in a hospital as you read this. We’re experiencing sandstorms and very strong winds with a speed of over 60km/hr, that can easily move a lightweight like me. It’s been fun as the winds have been pushing me forward as I walk but this incident proved that Coronavirus has got nothing on me compared to these winds!

As I sat at my desk in the office thinking about what would have happened to me, I realized things are bound to go wrong at some point. How prepared we are for such emergencies plays a big role in determining how we respond.

I shared the story on my WhatsApp status and a friend suggested that I should invest in shoes that have suckers. They’d keep me on the ground when the wind blows. As I was laughing at myself, I realized an emergency fund works in the same way.

An emergency fund is money saved to cover unexpected financial expenses. Job loss, medical emergencies, unexpected travel, car expense, traffic fine, taxi fare when you miss your alarm when you have a meeting on Monday morning with your scary boss, unexpected home repairs are some common emergencies. Which reminds me that a few days ago I forgot my house keys in the office, none of my colleagues was willing to come back to the office at 9 pm. I had to hire a handyman to break into my house. Handymen cost and arm and a leg in Dubai, but I have an emergency fund; a foolproof backup plan.

If any of these emergencies happen to you when you don’t have an emergency fund you will be stressed, and it will impair your decision making when coming up with a solution. Two, you will fall into debt.

First, you save money. Then the money saves you. — D. Muthukrishnan.

I remember last year I had figured out the exact amount of money that I need to pay all my basic living expenses; rent, food, water & electricity bills, internet, transport and one hike in the woods per month. I knew the exact figure, no guesswork. I was so happy. This is the first step towards saving an emergency fund. You figure out how much money you need to cover all your living expenses per month, then save, at a bare minimum, three times that amount. Ideally, a good emergency cushion should be six months worth of living expenses. You can’t come up with this figure without a budget.

Building this fund became a priority when somebody tweeted ’If you lost your job tomorrow, how long would you survive while maintaining the same lifestyle?’ These truths leave you with sweaty armpits on a cold day.

But seriously, how long would you survive?

The answer to this question has also become my basis for deciding how wealthy a person is. Leave social media flexing. Use this question and be honest with yourself.

A lot of personal finance teachers recommend that you should build an emergency fund first before getting out of debt. This prevents you from getting into more debt if you get into an emergency while paying your debt. Double tragedy! The advice makes sense, but I did both at the same time as I shared in last week’s article on beating the debt cycle.

But, if you’re to choose which one to tackle first between building an emergency fund and paying your Higher Education Loans Board loan, choose the emergency fund. This government will not come to your rescue when you get retrenched or when you’re sick. Save yourself first!

I used the first rule of personal finance ‘Pay yourself first’ by saving 10% towards saving for an emergency fund and using the rest of the money after paying bills to pay off debt.

Having money conversations has become part of my daily routine. I was talking to a friend last week when randomly, he told me a quote that their School Director would often use during assembly;

“Feed your horse first. When you’re in a war, you’ll never know when the next hit will happen, feed your horse first before you feed yourself.”

He used this quote while making his financial decisions for his business and personal expenditure. Feed your emergency fund first, before you buy anything that is not a basic necessity.

1. Decide how many months worth of an emergency fund you need

I work with six months but other personal finance books quote one month to one year worth of living expenses. Decide for yourself what works for you, but I know for sure that just one month is too risky.

2. Include emergency funds as part of your budget

An emergency fund should be treated as a basic need. Include it in your budget the same way you have rent, food, and other essential bills. What gets planned gets done. If it means printing your budget and hanging it on a wall, do it.

As Chelsea from The Financial Diet says, “If you don’t have one, it’s an emergency that you make one.”

3. Have a separate bank account for this fund

The idea is to make sure you don’t have quick access to this money like you do with your checking account. This ready money is tempting.

To prevent myself from spending it as soon as I saved it, I opened a KCB Simba Savings Account. I deliberately declined the offer to get an ATM for this account. At first, I set the account to allow only four withdrawals per year.

An emergency fund should be liquid-you should be able to access it within 24 hours or less.

4. Cut down unnecessary expenses

In fact, kill all unnecessary wants until you’ve saved up six months of living expenses. When hit with an emergency, that extra pair of designer shoes won’t save you! You’ll be so busy wallowing in regret you’ll wish you never accumulated so much crap at the expense of a calm mind in the face of disaster.

I currently take public transport to work yet I can afford a car lift because I don’t have 6 months worth of an emergency fund yet. I spent my Nairobi emergency fund to settle in this new city. Did you know that Dubai is 65% more expensive than Nairobi? I’m giving myself a six months deadline to build a Dubai emergency fund.

What are you willing to sacrifice to build your emergency fund?

5. Make small, consistent deposits

This is easier than imagining that you’ll get a lump sum amount in future that you’ll save towards the fund, or doing nothing at all! As James Clear says, both winners and losers have goals. What separates the two is their systems (consistent habits) over time.

Btw if you don’t read any other book this year, could you at the very least read James Clear’s Atomic Habits? It will make our money conversations easier 🙂

6. Any extra money made or received should go directly towards your saviour’s account!

When you have an emergency fund worth two years of expenses, you’ll be less afraid of your boss. You’ll have sufficient time to look for another suitable job. This is the first milestone in the journey of financial independence. — D. Muthukrishnan.

7. Get an extra source of income

If you currently don’t have an emergency fund, you’re treading on the edge. If an emergency occurs, you’ll fall back into debt, or get into bigger debt. I don’t know about you but the thought of being in debt, especially credit card or those blood-sucking mobile money apps was enough motivation to get a side hustle. I used to write for a magazine and was shocked when they offered to pay me $100 dollars for each article.

The best advice I could give anyone young person is,MAKE MONEY.As fast as you can, develop the work ethic and skills to be financially independent. Debt is a killer, and the modern economy is designed to trap you and get you operating on credit and owing money. Don’t fall for it. — Alexander J.A Cortes

8. Write down a ‘Don’t you fucking dare’ list (Chelsea from TFD taught me this)

What are you addicted to buying that’s not a necessity?

The reason why some of us are unable to save for such funds is that we live above our means, we’re busy buying crap that we don’t need. My addiction was clothes and shoes. To save up an emergency fund, write your ‘don’t you fucking dare list’ of things that you’ll not buy until you’ve built a safety net for yourself. Thank yourself later.

Having a fallback plan clears your mind, relieves anxiety and allows you to have the freedom to choose. Taking control over your money is about working towards having a life where you have multiple options. In the book A Simple Path To Wealth, JL Collins describes an emergency fund as ‘Fuck You Money.’ It’s the kind of money that will allow you to say no to jobs that you hate, walk out of abusive relationships because you can afford to fund your life, give you at least six months grace period to shop around for a job and boss that you want to work for.

How beautiful would life be if we had enough money to only work with people that we respect and like?

Why you need an emergency fund

1. When shit hits the fan, as it often will, you’ll have a fallback plan

You will not need to call random people to lend you money. And if you do call your dear friends, you know that you can pay them back within a day or two. This will build you a good reputation; we all want friends who payback when they say they will. Be one of those.

One of my best friends shared with our girls’ crew a story that challenged us. As a couple (she’s engaged) they had invested years learning how to write and were making enough money to cover all their living expenses through online writing. They were pretty confident that their income from this would grow exponentially. Then one day they woke up to an email that the companies they wrote for had changed their algorithms and no longer needed their articles. My first reaction when she shared this story was ‘Are you okay? Do you need help with some money to cover your expenses in the meantime?’ She said ‘I’m not okay since we’ve just lost our source of income, but we have a fat emergency fund to cover us for the year as we rebuild the income source.’ LIfe goals!

2. Clears your mind to dream bigger and to see possibilities

You can’t be stuck with basic dreams year in year out. Saving for this fund is hard. When you do it, you communicate to your subconscious mind that you can be more, you can dream more, you can conquer bigger obstacles. Since I already proved to myself that I can save an emergency fund in Nairobi, I know I can use the same hacks and save one for Dubai. I have no doubt about it.

3. It gives you options

Having money gives you options to choose where to live, the quality of food you can afford, which healthcare options you have access to etc. Being broke means that you’re stuck with whatever is handed to you. I have been poor for most of my childhood, I hate poverty.

4. It gives you the ability to be creative

Stress and anxiety when you don’t have options mean that you don’t have the luxury to be creative in your career or life in general.

5. Eliminates stress caused by small issues

Like having to wait for one hour for the bus fare to go down by 10 shillings!

The biggest cost of the attempt to thrive is the worry. You even worry about the worrying. — Naval

6. Stress levels decline which boosts your self-confidence

“it’s hard for an empty bag to stand upright”

As Benjamin Franklin once said, There are three faithful friends — an old wife, an old dog, and ready money. I can’t have the first two so I’m out here securing the bag with some ready money.

Originally published at on February 27, 2020.