6 Ways to Create a Financial Safety Net

Would you struggle to pay for a major car repair or cover your deductible on a homeowners insurance claim? If so, you’re not alone. An estimated 42% of Americans don’t have an emergency fund, and 40% couldn’t cover a $1,000 emergency expense with cash or savings.* But in a time of economic uncertainty and rising prices, how can you find enough money to create the savings you need?

It is possible, even if you start small. Use these six strategies to boost your savings and create a financial buffer for the unexpected.

1. Pay yourself first … and automatically.

Your paycheck likely comes direct deposited, so create your own direct deposit into a high-yield savings or money market account. You’ll build savings faster with their higher interest rates, but unlike other investment vehicles, the money is available to you immediately if you need it. Set aside a fixed amount with every paycheck: Experts recommend saving 20%, but even just $20 is a good start. To gradually increase this amount, look for something you can cut from your budget, like canceling a streaming subscription or skipping one takeout meal each week. Then divert the money you save into your emergency fund.

2. Evaluate your insurance coverage.

Insurance is a vital part of your financial safety net. Without adequate coverage, you may be financially vulnerable in an emergency. Go through your auto, home, life, and medical policies to make sure they cover what you need without charging for unnecessary extras. Shop around for rates and check for group discounts through your employer, school, or professional associations. For medical policies, look into cost-saving options, like mail-order prescriptions or telehealth.

3. Start a side hustle.

The gig economy offers a wealth of ways to earn money, including simple jobs like running errands. If you have a car, you can earn an extra paycheck driving for rideshare or food delivery companies. Love animals? Try pet sitting or dog walking. Or perhaps you’re handy at furniture assembly or home repairs. A side hustle offers freedom to set your own hours, so you can work as much or as little as you want to generate some extra cash.

4. Create passive income.

If you have some up-front money … and a tolerance for risk … you can earn passive income (income that flows in without ongoing labor) by investing in dividend stocks or a rental property. If not, you can rent out things you don’t use all the time, like tools, camping equipment, mountain bikes, or even your car. Expanding your cash flow beyond your primary job strengthens your financial resilience and provides greater flexibility in navigating life’s uncertainties.

5. Tap your home equity.

In specific cases, a home equity loan (HELOAN) or home equity line of credit (HELOC) can allow you to essentially borrow from yourself, then pay yourself back. With a HELOAN, you get a lump sum of money, while a HELOC works more like a credit card: You’re approved for a certain amount, and you withdraw it as you need it. However, both of these are secured by your house, so failure to repay can lead to foreclosure. Used wisely, though, this can be a way to pay down high-interest debts, fund home improvements, or cover other major expenses.

6. Turn windfalls into rainy day savings.

We’re all tempted to spend bonuses, tax refunds, and other unexpected payments on something for ourselves, but that trades financial security for temporary enjoyment. If you can’t bring yourself to deposit all that money into your emergency savings account, try buying one small treat for yourself and deposit the rest. And remember: You’re not depriving yourself when you save rather than spend money … you’re investing in peace of mind. That will bring you more joy than any object could!

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*U.S. News & World Report, “Survey: 42% of Americans Don't Have an Emergency Fund,” January 22, 2025.

The information in this article is for informational purposes only and should not be interpreted as financial advice. Consult a financial advisor for more information.