How to save $1,200 in 12 months to fund an emergency instead of relying on stimulus checks

Some might call it an emergency fund. But whatever you call it, having $1,200 saved up for your next financial emergency may help make an unexpected situation, such as a pandemic, a little easier to navigate. That dollar amount is what many Americans received this past spring in the form of a stimulus check from the government.

Even during tough times, saving a little more than $3 per day could be an attainable goal though it’s notably more difficult to do during times of high unemployment, business shutdowns and other types of emergencies.

But having the equivalent of a stimulus check saved up and ready, without having to depend on elected officials to agree on an aid package could end up being a good way to support your finances during challenging times.

Here are six tips to help you achieve this goal and give you greater peace of mind.

1. Divide your savings goal up

Choose the savings goal that works best for you. Daily, weekly (around $23 per week), biweekly (around $46) or ($100) monthly savings goals are a great way to kick-start your emergency fund.

Saying you’re going to save up $1,200 without a plan is going to make it a more difficult goal to accomplish. Smaller goals should help make the process easier to keep up with.

2. Budget to find the money and trim your expenses

Knowing how much money you’re bringing in and spending each month can help you start to identify ways to save more. Budgeting is one of the best ways to find these saving opportunities.

Cutting a recurring service that’s billed and rarely used or one that’s no longer needed can be one of the most efficient ways to find extra money.

It’s hard for people to follow through with a budget, says John McGowan, CFP, advisor and founder at Mandala Financial Advisors in Des Moines, Iowa. “Just because it’s our nature not to want to lock ourselves in,” McGowan says.

3. Automate your savings

Remembering to save is a tough thing to do.

That’s why having money sent to your savings before ever seeing it is one of the best ways to save.

“The way I tell my younger clients to get motivated to do that is obviously to just take it off the top of what they earn and never see it first,” says Missie Beach, CFP at Redwood Wealth Management, LLC in Alpharetta, Georgia.

This can be done by setting up a split-deposit, which means part of your direct deposit is sent to a different account than the rest of your paycheck.

Your bank also might be able to make recurring transfers between accounts to help you save on a set schedule.

4. Make sure you don’t touch the money in the emergency fund

People should treat their emergency fund, during non-emergencies, like they treat their retirement accounts before retirement.

“With the 401(k) it’s that mentality, like, ‘Oh, I better not touch that 401(k),’” Beach says. “… I know it’s for retirement. I know there’s a big penalty if I do. So if people can just translate that to this emergency savings fund, like, it’s a must-do.”

It’s important to remember what this account is earmarked for. But some banks will let you take this a step further.

“Label it ‘do not touch’ or label it ‘emergency savings,’” Beach says. “So then there is that extra layer of guilt if you even think about going to transfer money out. It just kind of pings you with that pang of like, ‘I shouldn’t be doing this.’”

5. Keep your emergency fund at a separate bank

Another way to try and not touch this money is to keep it in a place that you might not regularly see. This place could be in a high-yield savings account at an online bank. Though annual percentage yields (APYs) are substantially lower than they were more than a year ago, these accounts are still some of the best options for growing your savings.

“I think the temptation is just too great,” Beach says. “But if you just set up a new bank account, and have your direct deposit send $23 (per week) to that new savings account, I think it’s just out of sight, out of mind.”

It’s not a bad idea to have your savings at a different bank than your primary checking account. It’s about separating assets in order to build those savings habits, McGowan says.

“You have to visualize having that as a separate bank vault versus your day-to-day living expenses,” McGowan says.

Transferring money from savings to checking at the same bank can be done too easy thanks to online banking and mobile banking. Before you know it, your emergency fund could be depleted and used for other purposes.

6. Take advantage of extra money

Anything above your normal paycheck, should be put into a separate account, McGowan says. This could be the account you’re saving $1,200 in. Or it could be transferred to another savings account for another savings goal.

A stimulus check, a bonus, overtime, a raise or even an inheritance can be good opportunities to save. Try and set aside at least part of any income like this that might not be received on a regular basis.

Taking advantage of these saving events can help you boost your savings or make up for a bad week or month of saving.