How To Save For A Rainy Day Fund

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How To Save For A Rainy Day Fund
Photo by Damir Spanic on Unsplash

When it feels like you’re living paycheck to paycheck already, putting any money away might sound like a pipe dream. If that sounds all too familiar, don’t feel bad. According to a survey by the Federal Reserve Board, 47 percent of Americans polled admitted they wouldn’t have enough cash to cover an unexpected $400 expense. Another study by Bankrate’s latest Financial Security Index found that 28 percent of Americans said they have no emergency ratings. But the truth is that’s why we all should set aside a rainy day fund — when money is tight, a small hiccup could mushroom into a much costlier problem if you don’t have the funds to fix it. This calls for a strong review of expenses and setting a budget that you don’t deviate from.

Of course, the hope is that you won’t have to crack into this little emergency piggy bank. When you need it, though, you’re going to be grateful you made the extra effort to set something aside. So, here are a few solid tips on how to save money for a rainy day fund.

Rainy Day Fund vs. Emergency Fund

Let’s start by clarifying what exactly a rainy day fund is. You may hear it used interchangeably with the term “emergency fund,” and that’s technically accurate. A rainy day fund can be for emergencies. However, generally an “emergency fund” refers to a more robust savings account — financial experts suggest it should contain enough liquid funds to cover at least three to six months’ worth of expenses.

A rainy day fund is for smaller-scale emergencies and lesser financial shocks. Maybe your refrigerator gave out. Or a tree fell in your front yard, blocking your driveway. You’ll need to hire someone to take care of these problems. While they won’t set you back as much as a more dire, ongoing financial situation like the loss of a job, you will need a tidy chunk of change to resolve them. The idea is that rainy day fund expenditures are typically a one-and-done deal.

The Ideal Sum

There’s no right or wrong amount when it comes to setting aside your rainy day fund. One range that often gets tossed around in these conversations, though, is somewhere between $2,000 and $2,500. Hypothetically, let’s say that’s the amount you’re shooting for. You’ll need to divide that by how much you think you can spare each month. If you decide on $2200 and put $80 into the fund each month, it would take you just over 27 months or two years to hit your goal. Ideally, though, you’d find other ways to funnel extra funds into the account as well.

Rainy Day Fund Saving Tactics

Fortunately, there are myriad ways to build your rainy day fund. The key is finding what works for you and committing to it. Here are some proven strategies.

Set Up Automatic Debits

It’s easy to spend money on things you don’t need when it’s sitting in your bank account. But you know the old adage: Out of sight, out of mind. Setting up automatic debits that come out of your paycheck and go straight into your rainy day fund account is an easy way to add to your goal. And since you never really see it in your account, it doesn’t feel like you’re “losing” anything. This also makes it easier to put more away.

Within a few months you won’t feel the money missing from your usual payment and you’ll certainly be thankful as you watch your rainy day savings account increase month over month.

Make a Budget and Stick to It

This sounds like common sense, right? However, many of us either don’t have an actual budget established or we play loosey-goosey when it comes to abiding by it. If you want to build up your rainy day fund, though, you’re going to need to buckle down. And it’s not just skimping on your daily cup of coffee that’s going to make a difference on the bottom line, it means eliminating several non-essential expenses. It goes without saying your new budget should include carving out whatever amount you want to send to your rainy day account each month.

Here’s a Cliff Note’s version to help you set up a budget:

— Write Down Your Income

— Add Up Your Essential Fixed Expenses (rent, mortgage, child care, car insurance, health insurance, etc.)

— Add Up Your Essential Variable Expenses (some utilities, gas, groceries, etc.)

— List Nonessential Expenses (entertainment expenses, clothing, etc.)

Cut Extra Expenses

When you’re doing your budget, you’re undoubtedly going to find a few expenses that aren’t exactly necessities. And you’re doing the hard work, right? So, you’ll see those as an opportunity to save more. This could be anything from canceling Netflix to giving up your daily Dunkin’ Donuts habit. If you take a long hard look at your nonessential expenses you can undoubtedly find ways to cut corners here and there. Perhaps you go to the hair salon less often, perhaps you can bundle your streaming services, there are glaring ways to cut money if you look hard enough.

“Spring clean” Year-Round

Instead of purging your household and having a yard sale once a year, make it a regular part of your annual agenda. You’d be surprised how little time it takes to accumulate more stuff you don’t really need! Selling unused items at yard sales, swap meets, or on Facebook Marketplace can yield nice little deposits for your rainy day fund.

Diversify Your Savings Storage

In other words, don’t just rely on a traditional savings account to store your funds. Consider opening an interest-bearing account for added savings. Outside of the bank, establish a coin jug or jar at home. Sure, it won’t look like much at first. But it’ll add up over time and, before you know it, you’ll be dumping a big sum into one of your other accounts.

Designate “No-Spend” Days

As crazy as it sounds, most of us spend money on something every single day. It’s almost as though buying is an involuntary action. Take a look at your bank statement and see if that holds true for you, too. If it does, pick a few days out of the week or month and make a conscious effort not to spend any money on those days. Bonus? This little exercise may make you more aware of your spending habits in general.

Become a Couponer

Listen, this might sound tedious but there’s actually something incredibly satisfying about it. Finding great deals, learning to layer coupons, even getting groceries free — you’ll start to try to one-up yourself. And every time you level up your couponing skills, you can take the money you saved and stick it right into your rainy day fund.

Get a Side Hustle

Despite what you may think about side hustles, plenty of legitimate bonus gigs exist. Some give your savings account a small boost. Others can lead to big contributions. Do your homework and find something you truly enjoy doing so you’re not stressing about one more thing. There’s basically something for everyone in the world of side hustles, so take advantage!

Admittedly, saving money can be difficult. If it was easy, we’d all have fat nest eggs, right? As tough as it is, though, it’s worth it when a little emergency strikes. No matter how small you start, the important thing is that you start.

Insightful quotes about money

“Never spend your money before you have earned it.” —Thomas Jefferson

“If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed.” —Edmund Burke

“A simple fact that is hard to learn is that the time to save money is when you have some.” —Joe Moore

“Don’t tell me where your priorities are. Show me where you spend your money and I’ll tell you what they are.” —James W. Frick

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