Some financial experts suggest consumers should be saving 10 percent of their income for unanticipated expenses. These are essentially financial "emergencies," such as replacing the engine in your car or repairing damage to your home.
However, according to the U.S. Federal Reserve, most Americans save just 2.5 percent of their disposable personal income, which can make preparing for financial emergencies difficult.
Fortunately, there are ways to build a solid emergency fund. Consider taking these steps:
Get serious about repaying debt. Every dollar that you pay in interest on debt is a dollar that could be going to your savings. As such, paying off debt should be a top priority - even if it means temporarily taking a second job.
Use direct deposit. Set a certain amount of your income to be automatically deposited into your checking or savings account. Even socking away a small percentage can help you accumulate cash for a substantial emergency fund.
Delay spending. Stores, shopping networks and online shops make it easy to buy now. So-called "impulse purchases" can take a toll on your finances. Making a conscious decision before any purchasing can help you decide what items are worth buying - and what money can be put to better use in your emergency fund.
Reward yourself when you reach goals. Accumulating an emergency fund shouldn't be seen as a painful. Rather, you should celebrate your savings behaviors. When you put another $500 in your emergency fund, it's OK to take a small indulgence like buying that nice scarf you've been eyeing.
Use your credit card sparingly. A 2008 study led by Priya Raghubir, a professor of marketing at New York University, showed consumers tend to spend more money when paying with credit cards than they do when paying with cash, so leave your plastic at home. Take your card only when you have a planned expenditure to make.
Have a plan to reduce spending. Whether you "pay yourself first" or take whatever is available at the end of the month, you'll need to reduce spending or increase income in order to save. Create a plan to reduce spending in key areas by 5 or 10 percent, and put that savings in your emergency fund.
Watch your emergency fund grow. Your regular contributions plus compound interest will cause your fund to grow. Enjoy watching the balance of the account steadily increase over time.
Put a salary bump to good use. When you get a raise, it's time to adjust your budget. Take at least part of that extra money, and put it into your emergency account. Your standard of living won't increase, but it won't go down either.
Take advantage of coupons, rebates and cashback cards. A quarter here, a dollar there - it adds up. Funnel extra savings into your emergency fund.
Don't quit before you start. You may have tried and failed to save an emergency fund in the past. However, that doesn't guarantee failure this time. Having learned from past experiences, you're more likely to be successful.
Gary Foreman is a former financial planner who founded TheDollarStretcher.com website and newsletters. The site features thousands of articles on how to save your valuable time and money, including an article on Building an Emergency Fund.