A rainy day fund is not the same as an emergency fund. A rainy day fund is typically a few hundred dollars to $2,000 to cover short-term expenses and one-time unforeseen events. For instance, you need to change your car's tires or fix the broken furnace.
Your rainy day fund can help you avoid using credit cards to pay for these unplanned expenses. It provides you peace of mind and quick access to cash to set thing right.
How to start a rainy day fund
- Open a savings account with your existing financial institution and title it Rainy Day Fund.
- Transfer $500-$2000 into the account or make automatic transfers each payday until you have reached your goal.