fbpx

What is a Rainy Day Fund?

Have you ever had one of those weeks where nothing seems to be going right? Maybe your microwave that was on the fritz finally gave out, your washing machine decided it was done, or you picked up a flat tie on the way to work. It’s super inconvenient, feels like bad luck (especially when these things are stacked on top of one another), and an expense that you weren’t planning for. When it rains, it pours, and the purpose of your rainy day fund is to be the umbrella for these unexpected expenses.

What’s the purpose of a rainy day fund?

A rainy day fund is designed to provide stability during life’s hiccups. Unexpected expenses happen to everyone – and your rainy day fund gives you the ability to weather the storm.

How big should your rainy day fund be?

Ideally, your rainy day fund should be between $500 and $1,500. Unexpected expenses seem to happen at the most inopportune times, and your rainy day fund should provide enough of a cushion to get through periods of financial turbulence.

Establishing your rainy day fund is not expected to happen overnight – it will take some planning to build up! Remember, this is your rainy day fund goal – not the starting point!

Getting There

Rome wasn’t built in a day and neither will your savings. The key to growing your account to the balance that you want is to make a plan and stick with it!

Start with whatever you can – this is about getting into the habit and mindset of saving. Set up a realistic (but possibly slightly aggressive) plan and stick to it. Make an auto-deposit weekly, bi-weekly, or monthly and watch your account grow. If you can, set up a direct deposit from your paycheck so you do not even notice the money coming out of your account. You’ll be amazed at how quickly it can grow when you’re not paying attention.

Parting Thoughts

No one is immune to unexpected expenses – they happen to everyone. The best you can do is be as prepared as possible when they do happen. Save a little bit as often as you can, and you’ll be amazed at how big your rainy day fund will become.

  • […] established your rainy day fund and it’s on its way to being properly funded. Now you’re hooked on the savings machine and you […]

  • >