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Planning for a Rainy Day

Rain day fund

Life is unpredictable, which is why a rainy day fund is one of the most important components of a sound financial foundation. Even the most prepared, organized people can be caught off guard and put into a difficult financial situation when the unexpected arises. Because of this, it’s essential to have money tucked away in an emergency fund and a rainy day fund. 

When it comes to personal finance tips, there’s a lot of advice out there. A good chunk of it is common sense—don’t spend all your money at coffee shops and bars, try to live within your means, save where possible, splurge only when you can afford it, etc.—but some of the finer points of responsibly enjoying financial independence and working toward various financial goals.

Putting away any cash savings may feel unglamorous or impossible, especially for those facing high-interest debt, but it needs to be prioritized. It may seem counterintuitive, but reducing debt payments enough to make tucking away one month’s worth of expenses possible can actually make it easier to stay out of debt in the future.

If you’re wondering how to start a rainy day fund, start with a blast from the past: the good ole piggy bank.

You can put your spare change into a piggy bank or jar. All of that spare change can add up and be set aside for your rainy day fund. To raise even more funds, you may want to consider selling some of your belongings. Have any old electronics you can sell? What about those books you’ve already read? You can list and sell your items on Craigslist, a Facebook yard sale group or even an app like OfferUp, or eBay. Take any of the cash you get from these sales and sock it away into your rainy day fund.

While you’re coming up with cash for your rainy-day fund, we also recommend opening a savings account and automating to help beef it up faster. For example, if you are a Chime member, you can save 10 percent of your paycheck automatically – a surefire way to build a rainy day fund in record time.

A rainy day fund is different than an emergency fund, although these terms are often used interchangeably. An emergency fund is another type of savings account that can be tapped should you lose your job or a large chunk of income. An emergency fund traditionally is a large safety cushion of $5,000 to $10,000, which could cover your everyday expenses for three to six months. A rainy day fund is a smaller cash reserve that is used for one-time emergencies. You don’t have to be wealthy to create a rainy day fund. How much you need in that fund will vary per household. Financial experts recommend having anywhere from $500 to $3,000 in a rainy day fund. Set a goal that works for your budget.

Set a goal for yourself of how much you want to save. Then start reviewing your bills every month to see where you can save. Are you dining out and buying drinks every week? Do you have a cigarette or junk food habit? Cut down on expenses. Everything counts; even collecting the loose change you find in your bag, car, and home. The secret to saving, especially if you have limited means, is to start small. Make a sandwich for lunch instead of ordering out. Set any money aside and put it into your rainy day fund.

Some days are better than others. When those bad days hit and nothing seems to be going right, it’s nice to have a stash of cash that can act as your umbrella during a rainy day.

With that, I’ll leave you with this final tip: when you’re thinking of how to start a rainy day fund, don’t complicate the process. Start small. You don’t have to save a ton of money as long as you make sure you save enough to ride out a rainstorm.