An emergency fund can be one of those tricky financial tools for college students. Like a down payment on a house or a 401(k), it’s probably something you plan on dealing with after graduation, when you’re finally raking in a decent paycheck. 

But an emergency fund of savings is essential for the years you spend on campus. An unforeseen emergency expense can come your way before, during, or after college, and it can happen more than once.  

Your emergency fund helps you endure these surprising financial twists — whether it’s an expensive problem with your car or a sudden cough that turns into something more serious. 

The Benefits of an Emergency Fund

As a special reserve of savings, your emergency fund is there as backup whenever something goes sideways. It may help you repair a broken laptop, take your car into the garage, or pay for expenses when you lose your rent deposit after a move.  

It can also provide a safety net when a bigger emergency rocks your world, like if you lose your job or end up with a mountain of medical bills. 

Being prepared, as a general rule, applies to a lot of areas of your life. Just as you’re more likely to ace a midterm when you’ve studied and rested well, you’re more likely to handle an emergency without stressing out when you have savings set aside. 

What Happens without an Emergency Fund

Without an emergency fund, you face an emergency expense with just the money you have on hand. For the average graduate, that may be a few hundred dollars of expendable cash with each paycheck. But for college students, there may not be enough cash in your checking account to handle an emergency. 

In a jam, you can put these expenses on your credit card or a line of credit. However, these revolving products may not be an option if you’ve already maxed out their limits and damaged your credit.

At this point, you may consider short term loans available with bad credit. Studies show one-third of college-aged people have considered taking out payday loans in the past year. They’re an attractive alternative for many students who have bad credit and no collateral to leverage. 

If you’re also considering this option, you’ll want to research how to get your payday loan online carefully. Payday loans and installment loans for bad credit may bridge the gap of your empty savings account, but you must confirm you can handle the high cost of these online loans before you sign your name. 

Living without emergency savings is living your life on hard mode. And when you’re already concerned about your GPA, student loans, and a part-time job, you don’t need any more challenges in life. 

How Much Do You Need in an Emergency Fund?

While everyone benefits from having an emergency fund, not everyone needs the same amount of cash in theirs. How much you need depends on a variety of factors that are not limited to your expenses, risk tolerance, and career. People with fluctuating pay or who work in volatile industries may naturally need more savings.

For the average person, the goal is to save three to six months of living expenses. This includes rent, utilities, groceries, insurance, and minimum payments against your loans, line of credit, or credit cards. 

Savings this big can help you with small, infrequent repairs, or it can act as a cushion in case you get fired and take a few months to find a new job. 

Some financial advisors say you should also save enough to include discretionary spending as part of your living expenses. That means you should bump up your savings goal to cover fun and unnecessary spending, including monthly streaming services, bar tabs, and takeout. Including these expenses can help you continue with your normal habits even if you lose your job.

How Do You Build up Your Savings?

Setting aside any amount of money can be challenging if you’re not used to saving, but there are ways you can do it, even on a student’s budget. 

Set a Savings Goal

Having a target will help you figure out how much you should save with each paycheck. 

Pay Yourself First

Automating these contributions on payday, no matter how small, can help you steadily work toward your target without accidentally spending it on something fun first. 

Save Extra

You can also leverage any cash windfalls as a quick way to boost your savings. With tax season arriving soon, you can lock some of it away into your fund. The same goes for a bonus at work or any birthday money your relatives send.

Apply for Awards

You can also apply for scholarships, bursaries, and grants. Millions of dollars go unclaimed each year, so it may be worth asking your financial aid officer about how to find these awards. 

Alternatively, you can open a new tab and type in your profile + scholarships, remembering most bursaries offer funding for sports, leadership experience, ethnicity, sexuality, socioeconomic background, and academic achievement. 

The Takeaway

As a student, you may be working with less money than someone who’s working full-time, but that’s precisely the reason why you need an emergency fund on campus. You’ll have less expendable cash on hand on each payday.

While you may not have a lot of cash on hand week to week, savings helps you roll your money into something with greater purchasing power in the future. If you can build your savings incrementally with regular contributions on every payday, you’ll eventually squirrel away enough cash to cover a $500 bill you weren’t expecting. 

That’s not something everyone can do. In fact, one in four Americans would have to borrow money to cover an expense that size. While borrowing a personal loan may be an option, consider it a backup to your emergency savings.