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Rainy Day Fund vs Emergency Fund

What is a Rainy Day Fund?

Saving for a “rainy day” means having some money set aside for irregular expenses that you typically wouldn’t account for in your monthly budget, but expected to happen over time.

Expected Expenses

  • Routine Medical Costs
  • Routine Vet Visits
  • Minor Car Maintenance or Repairs
  • Regular Home Maintenance
  • Overspending
  • Forgotten Expenses

How much to tuck away into your rainy day savings depends on what situations come up over the course of a year, but most financial experts suggest keeping at least $1,000 in a savings account.

What is an Emergency Fund?

By creating emergency savings, you’re preparing for major financial difficulties in extreme cases, essentially making a financial safety net.

Unexpected Expenses

  • Job Loss
  • Serious Illness or Injury
  • Sudden Medical Bills
  • Large Unexpected Home Repairs

It is recommended to save three to six months of your monthly expenses for an emergency.

Do I Need Both?

It is good to have both a rainy day fund and emergency savings, but we know getting there can be a struggle. Start small by building your rainy day fund, and work up from that. Set up each fund in separate savings or money market accounts, then automate it so a little from each paycheck is put into those accounts.

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