Paying off debt is tough enough, so the idea of saving for an emergency fund at the same time might feel like climbing Mount Cook in jandals. But here’s the thing—life happens. Whether it’s a flat tyre, a vet bill for your furry mate, or an unexpected power bill, having a bit of backup cash can stop you from spiralling further into debt. The good news? You can do both, and it’s easier than you think! Here’s how to build an emergency fund without putting your debt repayments on the back burner.
1. Set a Realistic Sized Goal
You don’t need to save a mountain of cash straight away. Start with a small, achievable goal—like $1,000—which is enough to cover most minor emergencies. Once that’s sorted, you can work towards a bigger buffer of three to six months’ worth of living expenses. Even saving a few hundred dollars can stop you from reaching for the credit card when life throws a curveball.
2. Get That Emergency Cushion Sorted First
Smashing your debt is important, but having a little financial safety net first can stop you from going backwards. Instead of throwing every spare dollar at your loans, aim to stash away a small amount—$20 to $50 a week—until you hit that first $1,000 milestone. This way, you won’t have to take on more debt when an unexpected expense pops up.
3. Set It and Forget It (Automate Your Savings!)
The easiest way to build your emergency fund? Set up an automatic transfer straight to a high-interest savings account every payday. Even if it’s just $10 or $20 a week, it adds up fast when you don’t have to think about it. Plus, if it’s in a separate account, you’ll be less tempted to dip into it for non-essentials (looking at you, weekend brunches!).
4. Cut Back Without Cutting Out the Fun
Take a good look at your spending and see where you can cut back—without making life miserable. Maybe it’s swapping out that daily café coffee for a homemade brew, cutting back on Uber Eats, or pressing pause on a few subscriptions. Even small changes can free up extra cash to pop into your emergency fund.
5. Use Your Bonus Cash Wisely
Tax refunds, work bonuses, birthday money from your nana—these are golden opportunities to top up your emergency fund. Instead of splurging it all, try a 50/50 approach: put half towards savings and use the other half however you like. That way, you’re still treating yourself without missing out on financial security.
6. Keep Your Emergency Fund in a ‘Hands-Off’ Account
The best way to stop yourself from dipping into your emergency fund for non-emergencies? Keep it in a separate, high-interest savings account that’s a little harder to access. That way, it’s there when you really need it, not just when you feel like a spontaneous shopping spree.
7. Keep Chipping Away at Your Debt
While you’re building your emergency fund, don’t neglect your debt repayments. Stick to the plan, focus on clearing high-interest debt first (like credit cards), and make at least the minimum payments on everything else. Once your emergency fund is sorted, you can throw more money at wiping out that debt faster.
8. If You Use It, Refill It!
If you have to dip into your emergency fund—because, let’s face it, life happens—make it a priority to top it back up as soon as possible. Go back to those small, consistent savings habits to rebuild your buffer and keep yourself financially secure.
9. The Final Word
Balancing debt repayments with emergency savings isn’t just a dream—it’s totally doable with a smart strategy. Start small, be consistent, and before you know it, you’ll have a solid financial safety net without feeling like you’re missing out on life. The key? Make it easy, make it automatic, and remember—it’s all about progress, not perfection!
