A rainy day fund is like an umbrella. On most days, you won’t feel like you need it. But when it rains, you’ll be grateful to have one close by.

What Is a Rainy Day Fund?

A rainy day fund is a collection of personal savings meant for small emergency expenses. Think of situations like when your car gets a flat tire in the middle of your commute, and you need to get it towed to the nearest mechanic for a replacement. Or when your air conditioning unit breaks down in the middle of a ferocious heat wave, and you need to hire a repair person to fix it before your house turns into an oven.

It’s similar to an emergency fund but on a smaller scale. An emergency fund should contain three to six months’ worth of your income. This substantial amount is meant to tide you over in times of major instability, like when you lose a job or have to quit to take care of a sick relative. It’s supposed to supplement your income for an extended period of time so that you can continue to cover essentials without worry.

Do You Need a Rainy Day Fund?

The average American can’t afford a $400 emergency by using their savings. They would have to turn to another solution to cover the expense. If you’re one of the Americans in that precarious position, you should start putting together a rainy day fund.

A rainy day fund is just the right financial tool to deal with this type of problem. You could immediately use it to cover a small emergency expense (like a $400 home repair).

What If You Don’t Have One?

What can you do if you’re hit with a small emergency expense but have no rainy day fund to help you? In that case, you have a couple of options. You could charge the expense to your credit card. As long as the balance on your credit card is fairly low, this solution shouldn’t cause too much trouble. If the balance is too high, you risk maxing out your card and overloading yourself with repayments.

Another solution that you could try is a loan. Take a look at the options for same business day loans through CreditFresh in the form of a line of credit — you just might meet the qualifications to apply for one. If your application is approved, you can quickly access the borrowed funds and use them to cover your emergency expense. After that, you can direct your attention to a steady repayment process.

How Can You Get Started?

Starting a rainy day fund is easy. The first thing you should do is look at your budget to see how much you can afford to set aside in a savings account every month. If you’re not following a budget, you should rectify that mistake immediately. Download one of the top budgeting apps on your smartphone or computer and follow the instructions.

The next thing you should do is open a savings account. This is the perfect spot for your rainy day fund if you already have an empty savings account.

After figuring out just how much you can afford to save every month, go to your checking account. Automate a transfer for that amount into your savings account. This will keep your rainy day fund growing all year long.

Soon enough, your rainy day fund will be full, and you’ll be ready for any bad weather that comes your way.


David M. Higgins II, Publisher/Editor

David M. Higgins was born in Baltimore and grew up in Southern Maryland. He has had a passion for journalism since high school. After spending many years in the Hospitality Industry he began working in...

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