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How to start a rainy day fund

5 steps to start one and how much you need to weather any financial storm.

No matter how financially disciplined you are or how well you plan, you can’t predict the future, and it’s not always possible to stick to your budget when unexpected expenses happen. A rainy day fund can help make sure those expenses don’t cause long-term financial harm.

What is a rainy day fund?

A rainy day fund is money you set aside to cover the unforeseen expenses that arise when something goes wrong. Unlike emergency funds, which are intended to help with major financial upheavals like unemployment or a natural disaster, a rainy day fund is intended to help with smaller expenses.

5 steps to start a rainy day fund

Follow these steps to start saving for those unexpected expenses:

  1. Evaluate your needs. Take a look at your needs and determine how much you should set aside for a rainy day.
  2. Open a savings account. Compare savings accounts by interest, minimum opening deposits, balance minimums and more. The best savings accounts won’t make you work too hard to start earning interest.
  3. Save consistently. Start building your rainy day fund slowly by contributing a small portion of every paycheck. You can also set up automated transfers so that you’ll always put something away with every deposit.
  4. Adjust accordingly. If you’re a little late to the game, consider cutting down on unnecessary spending to add a bit more to your rainy day fund. Or if other financial obligations ease up or you get a raise, adjust how much you contribute.
  5. Replenish. It’s a good idea to regularly check in on your rainy day fund and replenish the funds whenever you dip into it.

Compare savings accounts for your rainy day fund

Use the table to compare interest rates and minimum deposits to find the best savings account for your unexpected rainy day expenses.

Name Product Annual percentage yield (APY) Fee Minimum deposit to open
Aspiration Spend & Save Account
Finder Rating: 4.2 / 5: ★★★★★
Aspiration Spend & Save Account
$0 per month or $7.99 per month for Aspiration Plus ($5.99 per month if you pay annually)
Deposits are fossil fuel-free. A spend and save combo account with unlimited cash back rewards and deposits insured by the FDIC and a $100 bonus when you spend $1,000 in your first 60 days.
Quontic Bank High Yield Savings
Finder Rating: 4.6 / 5: ★★★★★
Quontic Bank High Yield Savings
Interest is compounded daily. No monthly service fees. Competitive rates
Axos Bank High Yield Savings
Finder Rating: 4 / 5: ★★★★★
Axos Bank High Yield Savings
No monthly maintenance fees. No minimum balance requirements. Interest compounded daily.
American Express® High Yield Savings
Finder Rating: 4.6 / 5: ★★★★★
American Express® High Yield Savings
Enjoy no monthly fees and a competitive APY with this online-only savings account. Accounts offered by American Express National Bank, Member FDIC.
Gemini Earn
Gemini Earn
Up to 8.05%
Watch your cryptocurrency earn up to 8.05% APY with this nationwide account. Not FDIC insured.

Compare up to 4 providers

How much should I save in a rainy day fund?

Start by working up to a $500 fund, and then continue to build from there. You may feel comfortable with a fund of $500, or you may want to work your way up to a few thousand dollars. How much you need will depend on your circumstances. For example, if you have a high health insurance deductible or an older car, you may want to save more.

When setting a savings goal, consider what unexpected expenses you may face, as well as the other people who are dependent on you for financial support, such as spouses, children and elderly relatives.

Why do I need a rainy day fund?

You need a rainy day fund to protect your financial stability. It’s a safety net to make sure that you don’t end up with missed bills, credit card debt or a payday loan because of an unexpected expense, like:

  • If your car breaks down
  • If you receive an unexpected bill
  • If you need to offer financial assistance to a loved one in the event of a family crisis
  • If you need to buy a last-minute plane ticket

5 tips to save for a rainy day

How long it’ll take you to save up a sizable fund depends on your finances. But no matter what you can afford, setting aside a bit each month can help you build up a financial safety net.

1. Work out a budget

Working out a realistic budget is a crucial step in becoming a more efficient saver. Figure out how much you spend on everyday expenses and bills, and then calculate how much you can reasonably afford to save each week. Consider whether there are any expenses you may be able to cut back on in order to save more.

2. Earn interest

Make sure your rainy day fund isn’t just sitting in a checking account earning zero interest. Compare high-interest savings accounts that offer easy access to your funds. These accounts make your money work harder for you and will help you grow a larger rainy day balance while also allowing you to access your money quickly when an emergency arises.

3. Be wary of fees

Make sure you’re aware of all the fees that apply to your rainy day account ongoing service fees can quickly eat away at your savings balance without you even realizing it.

4. Automate your savings

Take advantage of tools that automatically move money into your savings account, like scheduled transfers and apps that round up your purchases and move the change to savings.

5. Don’t dip into your rainy day fund

Your rainy day fund is there to help out in emergencies only, not to be used for vacations or impulse purchases. Remain disciplined and don’t access the money in your account unless absolutely necessary.

Where to keep a rainy day fund

Keep your rainy day fund in a savings account that you can easily access. You want to make sure that you can access your money quickly when an unexpected expense pops up.

Bottom line

If you have the foresight and financial discipline to save for a secure financial future, you’ll be able to stay dry and keep your head above water no matter how much it rains. To get started, add a savings plan into your monthly budget and compare savings accounts to find one that’s the right fit.

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