Easy Steps For Building a Rainy Day Fund

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THIS IS NOT the same as an emergency fund. While also very important, an emergency fund is monies that you have set aside in case you lose your main source of income. An emergency fund is essentially the same as a rainy day fund but a larger amount of money so that you can continue to pay bills while figuring out a new way to bring home the bacon.

These two funds should be SEPARATE funds and an emergency fund should only be used in the scenario that you lost your main source of income. Having a rainy day fund will allow you to stay financially secure without having to tap into the emergency fund.

How much should you set aside for Rainy Day Fund?

The right amount of money in a rainy day fund varies for everyone. The cost of repairing a pipe leak in Manhattan will cost more than one would pay for the same service in Raleigh, North Carolina. Experts suggest $1,000 is a starting point for the average rainy day fund. In most instances, $1,000 should be able to cover things like a simple car repair or a new appliance.