Do you need a rainy day fund?
A rainy day fund is like an umbrella. Most of the time, you won’t feel like you need it. But when it rains, you’ll be grateful to have one nearby.
What is a Rainy Day fund?
A rainy day fund is a personal savings collection for small emergency expenses. Think of situations like when your car has a flat tire in the middle of your ride and you need to have it towed to the nearest mechanic for a replacement. Or when your air conditioner breaks down in the middle of a fierce heat wave and you need to hire a repairman to fix it before your house turns into a furnace.
It’s similar to an emergency fund, but on a smaller scale. An emergency fund should contain three to six months of your income. This substantial amount is intended to help you in times of great instability, such as when you lose a job or have to resign to care for a sick loved one. It’s supposed to supplement your income for an extended period of time so you can continue to cover the essentials without worry.
Do you need a rainy day fund?
The average The American can’t afford a $400 emergency using their savings. They should look to another solution to cover the costs. If you are one of the Americans in this precarious situation, you should start building a rainy day fund.
A rainy day fund is simply the right financial tool to deal with this type of problem. You can use it immediately 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 faced with a small emergency expense but don’t have a rainy day fund to help out? In this case, you have several options. You could charge the expense to your credit card. As long as your credit card balance is low enough, this solution shouldn’t cause too much trouble. If the balance is too high, you risk blowing up your card and overloading yourself with refunds.
Another solution you could try is a loan. Take a look at the options for same day loans via CreditFresh in the form of a line of credit – you might just qualify to apply for one. If your application is approved, you can quickly access borrowed funds and use them to cover your emergency expenses. After that, you can direct your attention to a regular repayment process.
How can you start?
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 put aside in a savings account each month. If you are not following a budget, you need to rectify this error immediately. Download one of best 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 place for your rainy day fund if you already have an empty savings account.
After determining how much you can afford to save each month, go to your checking account. Automate a transfer of this amount to your savings account. This will allow your rainy day fund to grow throughout the year.
Soon your rainy day fund will be full and you will be prepared for any bad weather that comes your way.