Rainy Day Fund: Saving For an Emergency

Rainy Day Fund: Saving For an Emergency

No one can be prepared for everything, but these tips will help you get close.


It’s impossible to plan for everything. Even with a strict budget, unforeseen events — your car breaks down, you come down with a sudden illness, a surprise job loss — can cause stress due to the monetary backlash it causes.

Saving here and there for a rainy day fund is good, but what happens when it starts pouring?

In a metaphorical sense, we can’t stop the rain, so we have to wait it out. And the way you stay dry is simple (in concept): Just save more.

Starting a Rainy Day Fund
It may be difficult to justify putting a portion of your paycheck into a fund for something that may never even happen, but it provides a safety net for those unexpected financial needs.

Try to cultivate a healthy paranoia about “paying yourself first,” as it’s often referred to. Saving money will help you be able to live on less than you actually make — a valuable asset in itself — while securing your future. You’ll still be able to afford “wants,” of course, but you’ll have to exercise self-restraint and fiscal discipline as you ward off the temptation to give yourself the full amount you earned.

If you’re a person who simply must celebrate paydays with a little retail therapy, see if your employer uses direct deposit. If so, you’ll be able to designate how much of your check gets put into separate accounts. Divvy up the check so that you can pay your bills, living expenses and put a little extra away for a rainy day fund.

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Watching Your Fund Grow
It might take a little while to get a sizable fund, but you will get there if you remain insistent that you keep saving. While you won’t be able to see the literal jar filling up with paper, you’ll be able to see your account grow.

But don’t just start pulling money from your paychecks without some sort of balancing action. If you use money-saving tips (eat in, make your own coffee, shop for deals, etc.) in tandem to starting your rainy day fund, you might not even notice you’re living on less.

How Much is Enough?
Advising you to save a certain dollar amount would be misleading — we live in different places, have different taxes, varying sizes of family and so on. But, generally, a rainy day fund should be able to cover the cost of functional living in your household for about three months. To be extra safe — and depending on how the economy is — some experts advise on saving enough to cover six months of living expenses.

Of course, if you’re looking for professional advice, a financial planner could be your best friend when it comes to something as vague as a savings plan for “something.” Just be sure to make it explicitly clear that this fund must be easily and instantly accessible and you should get any number of viable choices.

If you’re going solo, however, putting away around 10 to 20 percent of your pre-tax checks is usually a good rule to go by, but if you can’t afford it — or can afford more — this percentage will vary.

That’s just the beauty of a rainy day fund: If you get caught in anything from a sprinkling to a downpour, you’ll never kick yourself because you started it.

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