As a college student, I began building an emergency fund.

In my first year of college, my priorities were to socialize, excel academically, and enjoy myself. I believed that saving money meant cutting back on my daily coffee. Now, as I approach graduation, my focus has changed to securing a job and becoming financially independent. Saving money is no longer just about cutting back on small expenses; it's about making smart financial decisions.

Balancing a tight budget while preparing financially for the real world can be overwhelming, but I've learned that saving money is more than just setting aside spare change or giving up small joys. It's about creating a safety net for unexpected expenses, and for me, that meant starting an emergency fund.

Consistently setting aside money has helped me build an emergency fund, which has eased my anxiety about unexpected expenses and the uncertainty of life after graduation.

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What is an emergency fund?

An emergency fund is a cash reserve that can be used to cover unforeseen expenses. Whether your computer malfunctions during exam season, your car breaks down unexpectedly or you lose your job and need to pay rent, this fund can help alleviate financial stress when life takes an unexpected turn.

An emergency fund should be kept in an easily accessible account, such as a savings account, to serve its purpose. However, it's crucial to resist the temptation to use this money for non-emergency expenses, such as a spring break trip or a concert for your favorite artist.

Where I keep my emergency fund

It is advised by experts to keep emergency funds in high-yield savings accounts as they offer higher interest rates than traditional savings accounts, allowing you to withdraw your money at any time. However, investment accounts and CDs are not suitable for emergencies as they require you to lock up your funds for a set period. Although high-yield savings accounts may not provide enough APY for students to earn thousands of dollars per month, they can still help them reach small milestones faster.

After conducting extensive research, I selected Jenius Bank as my high-yield savings account due to its high APY, absence of fees, and no minimum balance requirement. My primary objective for my first high-yield savings account was to ensure that my money could grow without the added stress of paying fees or meeting a monthly deposit requirement.

The Western Alliance Bank High-Yield Savings Account was a strong contender due to its low minimum deposit, absence of monthly fees, and competitive APY. CNBC Select also considered it a top choice, although it had a slightly lower APY at the time.

I also evaluated the LendingClub LevelUp Savings Account, which provides a higher APY if you make monthly deposits of at least $250. This account has no minimum deposit or monthly fees and offers a free ATM card for easy access to your funds. However, for my initial emergency fund, I didn't want to be required to deposit a specific amount each month to receive the highest APY.

If you prefer a traditional bank, CNBC Select's banking experts suggest the Capital One 360 Performance Savings account as it offers no minimum deposit, no monthly fee, and an APY that matches the returns of online banks.

How I save as a college student

Since I was fifteen, I have consistently worked and valued saving. As a college student, my expenses are low, allowing me to save approximately 40% of my monthly income by adhering to the 40-40-20 budgeting rule.

According to the 40-40-20 budgeting rule, 40% of your budget should be allocated to necessities such as food, rent, and transportation. Another 40% should be set aside for savings, which can be divided among retirement funds, emergency funds, or debt repayment. The remaining 20% is for discretionary spending. However, if I don't utilize the full 20%, I roll the leftover amount into my savings.

As a college student, I prioritize building an emergency fund over a retirement fund since I am uncertain about my future career path and potential financial challenges.

I had all my savings in a traditional account before starting an emergency fund, but my funds were not clearly separated and I was not earning as much interest as I am now.

How to start an emergency fund as a college student

Saving money can be stressful, especially when you have multiple bank accounts. But once you become familiar with your options and make saving a routine, it becomes much easier.

Starting an emergency fund is simple when you select a bank or credit union. Most savings accounts only require basic information, such as your name, date of birth, contact information, home address, and Social Security number. Many of these accounts have no minimum deposit requirement, allowing you to begin with any amount that feels comfortable.

An undergrad living on campus with most costs covered by scholarships or financial aid may not need as large of an emergency fund as a graduate student who must balance rent and other bills. However, an emergency fund can always be increased as one's financial responsibilities and life progress.

Assessing your financial situation, savings habits, and long-term goals will help you select the optimal strategy for building your emergency fund, which will benefit you beyond college.

Here are some tips experts recommend to kickstart your emergency fund:

Create a savings goal

Experts suggest that as a student, you may have more flexibility in saving for an emergency fund. While the general rule is to save three to six months of necessary monthly expenses, some experts recommend starting with a goal of $1,000. However, factors such as rent, whether or not you have a car, and the cost of an unexpected trip home can impact the amount you set as your goal.

Set a monthly contribution

Saving a fixed amount each month based on income and expenses can help maintain a savings routine. You can begin with as little as $100 a month. It's better to start small than not start at all.

Automate your savings

By setting up automatic deposits between your checking and emergency fund savings accounts, you won't have to worry about manually transferring money and may be less likely to spend it instead of saving it, helping you stay on track to meet your financial goals.

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Our goal at CNBC Select is to deliver top-notch service journalism and in-depth consumer advice to our readers, enabling them to make well-informed decisions when it comes to their finances. Each of our personal finance articles is the result of thorough reporting by our team of expert writers and editors, who possess extensive knowledge of personal finance products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content independently, without any input from our commercial team or external third parties. We uphold the highest journalistic standards and ethics in everything we do.

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