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.
