How to Build an Emergency Fund Quickly This Tax Season

Protecting your family starts with saving money for the unexpected, and your tax refund provides the easiest path to get there. Unlike emergencies, tax season arrives on schedule, making it the ideal time to prepare for life’s curveballs.

Keep reading to learn how to set an emergency savings goal, why a tax refund is the best way to reach it, and where to keep your money saved.

How Much Should I Save for Emergencies?

A common starting point is 3-6 months of core living expenses. Those expenses include food, utilities, transportation, insurance, and rent or mortgage. You just need to add those costs for a single month, then multiply by 3 and 6. That equals your target range.

For example, say your family’s household expenses total to $3,000. Your savings goal would fall between $9,000 and $18,000. Seeing those numbers can feel daunting, but any contribution towards emergency savings is already better than $0!

FINANCIAL TIP: Try our free Emergency Savings Fund Calculator to create a savings goal based on your family budget.

How Do I Grow My Emergency Fund Faster?

Saving your IRS tax refund directly into an emergency fund is the single most effective method to grow your reserves quickly.

Emergencies don’t wait for convenient timing, and chipping away at a savings goal with only $75 a month will take YEARS to achieve. On the other hand, the average tax refund today is $3,676, which could give your emergency savings a strong head start.

FINANCIAL TIP: Before filing your taxes, decide how to allocate your IRS tax refund—NOT after the money arrives. Families with a strategy are far more likely to stick to their savings plan.

Should I Use My Tax Refund for an Emergency Fund?

Yes, absolutely! Timing works in your favor, too. Because the refund arrives at a predicable time (and all at once), you have a clear opportunity to kickstart your emergency savings.

Reasons to use tax refund for emergency savings:

• Immediate Savings Boost: As mentioned, a single tax refund deposit can build your emergency savings faster than monthly contributions.
• Money without Commitments: Most of your paycheck is already allocated to bills or expenses. A tax refund is not, which makes saving it a better decision.
• Organized Finances: Depositing your refund into a dedicated emergency account separates it from everyday spending. That way, your safety net will catch you when your family needs it.
• Earn Interest: Keeping your emergency savings in an interest-bearing bank account like a money market account lets your tax refund do more than sit—it grows and contributes to your fund without any extra effort.
• Financial Buffer: A funded emergency savings account means your family can absorb surprise expenses (ex: a medical bill, home repair, income gap) without reaching for a credit card or loan.

What is the Best Type of Account for an Emergency Fund?

Where you decide to keep your emergency fund is just as important as how much you save. The right bank account needs to be useful when emergency strikes—your money shouldn’t be hard to access or exposed to risk. Here are five things to look for:

• Bank Accounts with FDIC Insurance: Make sure your money is federally protected up to the $250,000 FDIC account limit. The safety of your hard-earned money is a top priority!
• Bank Accounts with Easy Withdrawal. Your money should be reachable through everyday methods—using a debit card, writing a check, withdrawing cash at ATMs, and digital banking transfers.
• Bank Accounts with Immediate Availability: When you face a financial emergency, the last thing you need is to worry about waiting periods or early withdrawal penalties. Look for liquidity!
• Bank Accounts that Earn Interest: Your emergency fund should grow over time with compound interest. Look for competitive savings rates that increase your balance automatically.
• Bank Accounts with Direct Deposit: Simplify your savings by adding your tax refund or a percentage of your paycheck straight into your emergency account—no manual transfers needed.

A money market account is the strongest emergency account option for most families. It earns more interest than standard savings accounts, offers easy access to your funds, accepts direct deposit, and is FDIC insured. It also keeps your funds liquid—no delays or penalties when an emergency hits!

Open Emergency Fund Account: Money Market Savings

Armed Forces Bank’s Premier Money Market Account is designed for hardworking families. It’s an interest-earning, secure home for your emergency fund, and getting started just takes a few minutes online!

Set up direct deposit before you file your taxes, and your refund goes straight into savings the moment it is paid. From there, your balance earns compound interest and grows on its own. Your emergency fund stands ready.

Give your tax refund a destination! Apply for a bank account online and kickstart your savings.

Open Money Market Account

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Tax Return & Emergency Fund FAQ

When is the tax filing deadline?

Federal taxes are due on April 15 most years. If that date lands on a holiday or weekend, the due date moves to the next business day. In addition, filing for a tax extension will push your deadline back to October 15, but if you owe any taxes that year, you must pay them by the April deadline.

How do you set up direct deposit for IRS tax refund savings?

When you file your tax return, you will have the option to choose how your refund is delivered. To send it directly to an emergency savings account, follow these steps for IRS direct deposit:

1. Select “Direct Deposit” as your refund delivery method (rather than paper check).
2. Choose “Saving Account” when prompted for the account type.
3. Enter Bank Routing Number to identify your financial institution.
4. Provide Bank Account Number so the direct deposit reaches the right emergency savings fund.
5. Review the Details Before You Submit, since corrections after filing are not possible.

After the IRS processes your tax return, the refund will direct deposit into a savings account.

Where should I put my emergency fund?

Put your emergency savings in a money market account or high-yield savings account at FDIC-insured banks. These options keep your money safe while earning interest.

We recommend money markets as the top choice because they have more liquidity and accessibility than high-yield savings. Many high-yield savings accounts are offered by online-only banks, which can delay quick withdrawals during a crisis.

What is the difference between emergency savings and regular savings accounts?

Emergency savings accounts have money set aside specifically for unexpected costs, like medical bills, car repairs, or job loss. This money is meant to be used only when something urgent comes up. Meanwhile, regular, everyday savings accounts are for planned goals, such as vacations, home projects, or large purchases you are working towards.

When you keep your emergency savings separate from other savings, you are guaranteeing that your safety net is available when you need it!

 

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HELPFUL TAX FILING RESOUCES:
Tax Preparation Tips
Explore Tax Calculators Online
Tax Deductions for Military
Do Personal Loans Count as Taxable Income?