Course Catalog / BMU 040 / Lesson 4 of 5
BMU 040
Lesson 4: Start an emergency fund
Quick review
1. Who insures money in a bank?
See the answer
The FDIC. The NCUA covers federally insured credit unions.
2. Name one fee to ask about.
See the answer
Monthly, overdraft, ATM, or opening deposit fees.
Why this matters
A car repair or a medical bill can wreck a month. The CFPB says an emergency fund is money set aside for unplanned costs like these.
Even a small amount helps you recover faster. In this lesson you will set a starter goal and a plan to save on its own.
Start with what you already do
You already plan for some things, like saving up for a gift.
Common belief: Saving is only for people who have money left over.
What is actually true: The CFPB's Start Small, Save Up idea is to begin with what you can afford. A small amount each week is a real start.
In this lesson you will
- Set a starter emergency fund goal
- Plan an automatic transfer to savings
- Write rules for when to use the fund
Key words
- emergency fund
- Money set aside for unplanned costs, like a car repair or a lost paycheck.
- automatic transfer
- A set amount your bank moves from checking to savings on a set day.
- savings goal
- The amount you want to save and the date you want to reach it.
Set a starter goal
The CFPB says the right amount depends on your life. Think about surprise costs you had in the past and what they cost. Start with a goal you can reach, then build on it.
| If you save | In one year |
|---|---|
| $5 a week | $260 |
| $10 a week | $520 |
| $20 a week | $1,040 |
Make it automatic
The CFPB says automatic transfers are one of the easiest ways to save. Your bank or credit union moves money from checking to savings on a set day. You pick how much and how often.
- Set the transfer for the day after payday.
- Start small. You can change it later.
- Keep an eye on your balance so the transfer does not cause an overdraft.
- Set a phone alert to check your balance.
Use it, then refill it
Write rules for what counts as an emergency. The CFPB says using the fund for a real emergency is a success, not a failure. Then make a plan to fill it back up.
Text version of this figure
Start an emergency fund. Goal, auto transfer, rules.
- Step 1, Set a starter goal: Base it on past surprise costs.
- Step 2, Pick an amount: Even $5 a week counts.
- Step 3, Make it automatic: Transfer the day after payday.
- Watch your balance: Avoid an overdraft fee.
- Use it and refill it: Real emergencies only, then rebuild.
Source: CFPB emergency fund guide; Start Small, Save Up (Oct 29, 2026).
Worked example: Dana's fund
Dana's budget now has about $40 left over each month.
- Her last surprise cost was a $400 car repair. She sets a starter goal of $400.
- She is paid every two weeks. She sets an automatic transfer of $18 the day after each payday. That is $9 a week, which fits the $40 she has left each month.
- At that pace she reaches $400 in about 45 weeks.
- Her rule: car, health, or lost pay only.
Dana is a made up example.
Practice: Plan the savings
All amounts are made up.
- You want $300. You save $10 a week. How many weeks?
- You are paid every two weeks. How much do you move each payday to save $10 a week?
- Is concert tickets an emergency? Is a flat tire on the car you drive to work?
Check your practice: feedback
- $300 divided by $10 is 30 weeks.
- $20 each payday.
- Concert tickets: no, that is a want. Flat tire: yes, you need the car for work.
Common mistakes
- Waiting until you have more money. Start with what you can, even $5.
- Keeping the fund in your wallet. Keep it in a separate, insured savings account.
- Feeling bad when you use it. That is what it is for. Make a plan to refill it.
Try it: Set up your fund
Pick your scenario:
- I can save a little each week
- My pay changes, so I save when I can
- I have savings and want a plan for it
- Write your last surprise cost.
- Set a starter goal.
- Pick a weekly amount you can keep.
- Plan an automatic transfer for the day after payday.
- Write your rules for using the fund.
- Add savings as a line on your budget.
Do it by: this week
Reflect
What would an emergency fund change for you?
Check your understanding
1. Ana saves $5 a week. How much is that in a year?
- $60
- $260
- $520
See the answer and feedback
B is correct. Yes. $5 times 52 weeks is $260.
A: That is $5 a month. Review the savings table.
C: That is $10 a week. Review the savings table.
2. What day is best for an automatic transfer?
- The day after payday
- The day before payday
- A random day
See the answer and feedback
A is correct. Yes. The money is there, so you are less likely to overdraw.
B: Your account may be low then. Review Make it automatic.
C: Plan it around payday. Review Make it automatic.
3. Sam used his fund to fix his car. What should he do now?
- Close the account
- Wait until next year to start saving again
- Make a plan to refill it
See the answer and feedback
C is correct. Yes. Using it is a success. Then rebuild.
A: Keep the account for next time. Review Use it, then refill it.
B: Waiting leaves him with no cushion. Plan to refill it now, a little at a time. Review Use it, then refill it.
Takeaway: save
- Pick a goal and divide by what you save
- Move money on payday
- Small amounts add up
- Emergency money is for real emergencies
Recap
- An emergency fund covers unplanned costs.
- Start with a goal you can reach.
- Automatic transfers make saving easier.
- Use it for real emergencies, then refill it.
You now have: a starter savings goal, a weekly amount, and a transfer plan.
Next up
Next you will learn about free tax filing and finish your budget. Go to Lesson 5: Free tax help and your plan.
Sources
- CFPB: An essential guide to building an emergency fund (current as of Oct 29, 2026)
- CFPB: Start Small, Save Up (current as of Oct 29, 2026)
- CFPB: Building your savings? Start with small goals (booklet) (current as of Oct 29, 2026)
