In a perfect world, your rainy day fund would equal the highest amount you can expect to pay for an unexpected bill. If your health care deductible is $1,500, you’ll want to keep at least that much in your rainy day fund. Car repairs also vary in price, but common fixes on the brakes or alternator cost between $400 and $700. In my opinion, there is nothing wrong with continuously adding to your rainy day fund just in case you happen to have the misfortune of two unexpected bills in a short time period. Better safe than sorry!
How to Save for a Rainy Day Fund
Fortunately, are easy to build as long as you stay disciplined and are willing to get creative when cash is tight. First, you need to build a budget or adjust your current plan to contribute to a rainy day fund.
Knowing how much free cash you have available to you will let you maximize how much you set aside and reach your goal faster. Here are the best ways to save for a rainy day fund:
- Set up a direct deposit: Create a separate direct deposit so that some of your paychecks go straight to your rainy day fund.
- Download an app: Some budgeting apps automatically split your paycheck according to your budget and give you regular savings advice and tips.
- Transfer cash monthly: Set up an automatic transfer that occurs once a month. For example, you may want to transfer $50 per month from your bank account to a money market fund.
- Create a rainy day fund jar: Throw your spare change into a jar or piggy bank. While your fund will start out small, it will build over time and is easy to access.
- Replace some discretionary spending: If you normally have a latte in the morning, order take out for most meals or shop for new clothes every month, consider scaling back for a few months. Place that discretionary money in your rainy day fund until you reach your goal.
Where to put your Rainy Day Fund?
Your rainy day funds should be readily available and kept in an account that’s liquid. This means you can retrieve the funds quickly without any fees. Money market and savings accounts, as well as high-yield bank accounts, are great options. Most major banks and regional banks offer at least one of these options.
