This Is the Most Underrated Financial New Year’s Resolution

It’s pretty common to end a year by coming up with a list of resolutions for the next. And since our finances are something nearly everyone can stand to improve, a lot of people focus on different money goals for the new year.

Motley Fool Money recently surveyed Americans about their financial New Year’s resolutions for 2025, and I was a bit surprised that “building an emergency savings fund” came in just fifth place. Here’s why this goal should be ranked higher — and how you can start creating an emergency fund next year.

And coming in at No. 5 on our list…

“Building an emergency fund” came in fifth place in our survey (with 9% of respondents listing it), following these other goals:

1. Paying off debt (24%)
2. Saving for a significant financial milestone (14%)
3. Saving for retirement (9%)
4. Increasing income (9%)

All of these resolutions are certainly worthwhile, but having an emergency fund can make your day-to-day life easier — having an impact on your happiness now. With emergency savings, you’ll sleep better at night and can tackle life’s little (and not-so-little) catastrophes much more easily.

Our Picks for the Best High-Yield Savings Accounts of 2024

American Express® High Yield Savings Member FDIC. APY 3.90% Rate info 3.90% annual percentage yield as of December 12, 2024. Terms apply. Member FDIC.	3.90% Rate info 3.90% annual percentage yield as of December 12, 2024. Terms apply.	$0
Capital One 360 Performance Savings Member FDIC. APY 3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening. Member FDIC.	3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.	$0
Western Alliance Bank High-Yield Savings Premier Member FDIC. APY 4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Member FDIC.	4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	$500 to open, $0.01 for max APY

What can an emergency fund do for you?

I’m glad you asked! An emergency fund is the cornerstone of good money management, because it gives you a pot of cash to draw on in the event of an unplanned expense that your checking account won’t cover. This could be a medical bill, a car repair, or even something like owing the IRS more taxes than you realized come Tax Day.

And if you get laid off or experience work upheaval of some kind, your emergency fund can help you handle your regular expenses until you get back on your feet. Whatever your reason for dipping into your savings, spending that money is better than taking on potentially expensive high-interest debt (like that on a credit card) to cover your costs.

That’s what I did before I built emergency savings, and I promise you, having to pay interest on top of the actual bill was never fun, and kept me in a deepening debt hole for years.

How can you build savings in 2025?

By this point, you may be saying, “That’s all well and good, but I live paycheck to paycheck and saving anything seems impossible.” And I feel you — I was you until fairly recently, and having an emergency fund is a new development in my life.

Where do you keep an emergency fund? I recommend a high-yield savings account — click here for our list and earn around 4% APY on your cash.

I was able to change my circumstances by undertaking a career change and finally being able to appreciably grow my income. If you lack enough money to keep up with the rising costs of just living your life, I recommend you do the same.

Increase your income

There are a few ways to approach this. You could ask for a raise at your current job, but you’re likely to do better by changing jobs altogether. An ADP study found that job switchers realized noticeably better salary gains (about 33% higher) than those who stayed and got raises.

Another option is to take on extra hours (if possible and if you work a job with hourly pay) or add a part-time gig of some kind. This could be joining the gig economy in some way (food delivery or driving for ride-hailing apps, perhaps) or taking on freelance work in your field or another, if you have some in-demand skills.

Cut your spending

This is where I tell you that spending your evenings huddled under a 40-watt light bulb eating ramen noodles is no way to live, even if you need to save money. Instead, look to make reasonably painless cuts to your budget.

Get rid of the streaming service you watch just once a month, and if you order takeout three times a week, maybe cut back to just one time (cooking at home is actually more fun than you think it’ll be, especially if you can do it together with a partner or a kid).

And if you can save money on a bigger expense (like your auto insurance, for example), that’ll be even more effective than cutting $5 here or $10 there. Shop around for services like auto insurance, cellphone plans, and internet.

Any money you bring in or cut from your spending can be added directly to your high-yield savings account. Making temporary sacrifices to bulk up your savings balance is a move that Future You will thank you for. If you lack savings, the best way out really is through — I believe in you.

If you’re making a list of financial New Year’s resolutions for 2025, I recommend adding “build an emergency fund” to it — and put it higher than No. 5. This money move will improve your life by leaps and bounds.