Using Your Tax Refund to Build an Emergency Fund
April 15, 2025
Tax Day is here, and for many people, that means a tax refund may be on the way. While it’s tempting to splurge on something fun, consider putting your refund to work for your future—starting with your emergency fund.
At First Bank and Trust Company, we’re here to help you make the most of your money, and building a strong financial foundation starts with being prepared for the unexpected.
Why Emergency Funds Matter
An emergency fund is your financial safety net. It’s designed to help you handle life’s curveballs—unexpected medical bills, car repairs, or even a sudden job loss—without dipping into your long-term savings or going into debt.
Peace of mind is priceless, and having an emergency fund means you’re covered when life doesn’t go as planned.
How Much Should You Save?
A good rule of thumb is to save three to six months’ worth of living expenses. This should cover essentials like housing, utilities, food, and transportation. The exact amount depends on your lifestyle, income stability, and family situation.
Just getting started? That’s okay. Even saving $500 to $1,000 is a great first step.
How to Build Your Emergency Fund
Using your tax refund to start or grow your emergency fund is a smart financial move. Here are some additional strategies to help you build it faster:
- Set a Clear Goal – Know how much you need by calculating 3-6 months’ worth of living expenses and break it into manageable milestones.
- Automate Your Savings – Set up automatic transfers to your savings account so you don’t even have to think about it.
- Trim the Extras – Review your budget for areas where you can cut back and redirect those funds.
- Put Extra Money to Use– Tax refunds, bonuses, or even birthday money can all give your fund a boost.
- Consider Extra Income – Side gigs or freelance work can help you reach your savings goal faster.
When to Use Your Emergency Fund
Emergency funds are for true emergencies. Think:
- Unexpected medical bills
- Job loss
- Major car or home repairs
When these situations arise:
- Evaluate the Expense – Is this truly an emergency?
- Withdraw Only What’s Necessary – Take out just enough to cover the cost.
- Rebuild Promptly – Make a plan to replenish the fund so you're ready for the next unexpected event.
Tax Refunds That Work for You
If you’ve been wondering how to put your tax refund to good use, starting or strengthening your emergency fund is one of the smartest things you can do. It’s a simple way to give yourself security, confidence, and financial freedom.
Need help getting started?
At First Bank and Trust Company, we’re here to guide you every step of the way. Visit your local branch or reach out online to speak with one of our financial professionals. Let’s turn this year’s refund into a stronger, more secure future.