Your first thought might be, “what is a rainy day fund?” When I first heard the term that was my thought. In fact, I thought it was another word for an emergency fund. Some people do use the term synonymously with an emergency fund, but technically there is a difference. An emergency fund is ideally for true emergencies such as an illness or a loss of income, whereas a rainy day fund is intended for smaller unexpected or non-budgeted expenses. Many people would typically dip into their emergency fund for a non-expected expense and I have done it myself, but there is wisdom in adding this to your list of recommended savings accounts.
Action Steps Towards Establishing a Rainy Day Fund
The first step is to realize the need for this account. Next, determine how much you want to have in this account; I believe $1,000 is a decent starting point and you can determine what makes sense for you based on what typically comes up for you. From there, determine how much money you can add to this account monthly without impacting your budget significantly, or taking too much from other savings accounts you are building. If you really want to get aggressive, pick up a side hustle to earn an extra $1,000 dollars. Once you have your rainy day account, you will feel even better knowing that you will no longer have to tap into your emergency fund for the unexpected expenses.
How to Win up to $750 Towards Your Rainy Day Fund
I wrote this post as a part of the America Saves Week campaign, which is an initiative of the Consumer Federation of America, with a goal of encouraging and inspiring Americans to save. Even better, one of our readers will have the opportunity to win $100 simply by taking the America Saves Pledge. In addition, you can enter to win up to $750 by telling your savings story and sharing it via social media. What better way to start your rainy day savings plan than by winning money? Click here to take the pledge and learn about the contest.
If this has inspired you to take a step towards starting a rainy day fund, I’d love to hear about it. Feel free to email me or simply comment below.
Stay Tuned for the next America Saves Week post where I will discuss one of my favorite topics, building your retirement savings.